EFTA01377062.pdf

CIO Insights - August 2016 Macroeconomics 5 MACROECONOMICS The impact of uncertainty Uncertainty regarding the Brexit Key growth forecasts is worried about meager economic referendum result is likely to burden 2016 GDP CIO forecast growth and near-zero inflation rates. economic development in the for 2016 Emerging markets (EM) might be UK - and the Eurozone - and lead China indirect beneficiaries of current investors and consumers to spend less. We expect a deceleration of economic growth in the UK to 0.8% a 6.9% 6.3% developments, as EM governments and corporations have used the low interest-rate environment next year, down from an expected Eurozone and significantly extended their 1.3%in 2016. This should lead 1.7% - 1.4% debt since 2007. Rising debt has to declining imports. As the UK's increased the dependency on the most important trading partner, the monetary policies of advanced Eurozone is likely to be materially economies, particularly the United affected by this and we have Japan States. The postponement of U.S. trimmed our Eurozone growth forecast to 1.2% in 2017 down • 0.5% ♦ 0.5% rate hikes has therefore to some extent alleviated their situation. from an expected 1.4% in 2016. Countries with less extensive trading In the last few years, China's political US links to the UK should be much less leadership has focused on credit- 2.0% - 1.8% affected. Our U.S. growth forecast financed investment to stimulate the of 2% for 2017 remains unchanged economy. Several sectors therefore from pre-referendum levels, as experienced over-capacity and do our forecasts for Japan and rising non-performing loans. This emerging markets. start tapering QE in spring 2017 have has increased the pressure on the been temporarily muted. The Bank government in Beijing to launch It's our opinion that central banks of England (BoE) has once again structural reforms. The example have acknowledged the result of joined the club of central banks of India shows that economic the Brexit vote, and may alter policy pursuing quantitative easing (QE) restructuring and market-economy to cushion any broader economic policies and has cut its base rate by reforms can be worthwhile. For repercussions. The U.S. Federal 0.25%; further policy interventions 2017, we expect Indian growth to Reserve (Fed) is likely to raise are possible. The Bank of Japan rise by 0.3 percentage points to official rates only moderately. At (BOJ) is likely to extend its asset 7.8%. By contrast, Chinese growth is most, we would expect two rises purchase program and to cut rates forecast to decelerate from 6.3%in of 25 basis points each by mid- further, but the Brexit vote is not to 2016 to 6% in 2017. 2017. Discussions whether the blame. Rather, Japan's central bank European Central Bank (ECB) will Sources: Deutsche Bank Wealth Management. Data as of August 15. 2016. Past performance is not indicative of future returns. Readers should refer to the explanatory notes at the end of this document. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0073598 CONFIDENTIAL SONY GM_00219782 EFTA01377062