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Global
29 June 2009
World Outlook
Recovery ahead
Deutsche Bank AG/LondonAll prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from localexchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. DeutscheBank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firmmay have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a singlefactor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's researchis available to customers of DBSI in the United States at no cost. Customers can access IR athttp://gm.db.com/IndependentResearchor by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARELOCATED IN APPENDIX 1. MICA(P) 106/05/2009
 
Economics
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   M  a  c  r  o
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   E  c  o  n  o  m   i  c  s
 
For the first time since the beginning of the downturn we have revisedup our forecasts for economic growth. We now expect global growth torise to 2.5% in 2010 compared to 2.0% envisaged in our previous WorldOutlook from 30 March 2009. The upward revision is due entirely tobetter prospects for industrial countries, where growth next year is nowseen reaching 1.0% compared to 0.3% before.
 
Most of the upward revision to global growth in 2010 results from astronger outlook for investment growth (which has risen to 2.0% from0.1%) and export growth (up to 4.1% from -2.2% before). The improvedprospects for exports and investment reflect greater confidence in theeffectiveness of authorities’ efforts to restore stability in the financialsector.
 
In our view the global economic and financial crisis has had two keydrivers: (1) the breakdown of the global growth model of the pastdecade or so, which led to unsustainable international current accountimbalances; and (2) the financial crisis, which ensued when the inabilityof debtors to repay their creditors became evident. As a result, we canexpect to see lower trend growth and higher economic volatility, theopposite of what the world economy experienced during the era of theGreat Moderation.Economic Forecast Summary
GDP growth, % CPI inflation, %2008 2009F 2010F 2008 2009F 2010FG7 0.6 -3.9 1.0 3.2 -0.1 0.8--US
1.1 -2.8 1.2 3.8 -0.5 0.8
--Japan
-0.7 -7.0 0.3 1.4 -0.8 -0.5
--Euroland
0.6 -4.3 0.8 3.3 0.3 0.9
EM Asia 6.8 4.2 5.8 6.5 1.3 2.9--China
9.0 7.5 7.2 5.9 0.0 2.0
--India
7.3 5.5 6.0 8.7 3.5 5.1
EMEA 4.3 -3.3 2.9 12.6 9.3 8.5--Russia
5.6 -4.4 1.8 13.3 11.2 10.3
Latam 4.4 -2.3 3.0 8.8 6.3 6.6--Brazil
5.4 -1.0 4.0 4.6 4.2 4.2
Industrialcountries
0.7 -3.8 1.0 3.3 0.0 0.8
EM countries 5.8 1.4 4.5 7.8 3.6 4.5Global 2.9 -1.5 2.5 5.2 1.5 2.4
Source: DB Global Markets Research
 
 
29 June 2009 World OutlookPage 2 Deutsche Bank AG/London
Table of Contents
Global Overview
 Recovery ahead....................................................................................................................................................................3
Geopolitics
The Dollar and Its Rivals.......................................................................................................................................................7
Commodities
Investment Flows & Fundamentals...................................................................................................................................11
US
Robust recovery remains elusive.......................................................................................................................................13
Japan
Initially V shaped production recovery...............................................................................................................................17
Euroland
Constrained expectations...................................................................................................................................................19Germany: Export dependence has become a drag............................................................................................................21Other EMU economies......................................................................................................................................................22
UK 
A relatively early exit from recession – Debt and employment to rise well after end of recession...................................23
Other European countries
Sweden, Denmark, Norway, Switzerland...........................................................................................................................25
CE3
Sustainable recovery still some time away........................................................................................................................27
Peripheral dollar bloc
Recession themes persist..................................................................................................................................................29
Asia (ex Japan)
Stimulus supports China and India, but for how long? – Asia-8 simply following the G-2 lead.........................................31
Latin America
Safe but recovering unevenly.............................................................................................................................................33
EMEA
Tentative signs of recovery................................................................................................................................................35
Forecast tables
Key economic indicators....................................................................................................................................................37Interest rates......................................................................................................................................................................38Exchange rates...................................................................................................................................................................39
Contacts
...........................................................................................................................................................................40
 
29 June 2009 World OutlookDeutsche Bank AG/London Page 3
Global Overview: Recovery ahead
•
 
For the first time since the beginning of thedownturn we have revised up our forecasts foreconomic growth. We now expect global growthto rise to 2.5% in 2010 compared to 2.0%envisaged in our previous World Outlook from 30March 200
9
.
•
 
The upward revision is due entirely to betterprospects for industrial countries, where growthnext year is now seen to reach 1.0% compared to0.3% before.
•
 
Most of the upward revision to global growth in2010 results from a stronger outlook forinvestment growth (which has risen to 2.0% from0.1%) and export growth (up to 4.1% from -2.2%before). The improved prospects for exports andinvestment reflect greater confidence in theeffectiveness of authorities’ efforts to restorestability in the financial sector.
•
 
In our view the economic and financial crisis hashad two key drivers: (1) the breakdown of theglobal growth model of the past decade or so,where a number of (mostly “anglo-saxon”)countries imported goods and services largely fordomestic consumption and others (such as Japan,Germany, and China) produced to satisfy thisdemand; and (2) the financial crisis, which ensuedwhen the inability of debtors (beginning with USsub-prime mortgage borrowers) to repay theircreditors became evident. The demise of theglobal growth model seems likely to depressglobal trend growth for a number of years tocome; the financial crisis is introducing greatervolatility around this lower growth trend. Theoutcome is likely to be a reversal of the generallyfavorable trends that emerged during the era ofthe Great Moderation. In the place of high growthwith low economic volatility we can expect to seelower trend growth and higher economicvolatility.
In this overview article we first present and discuss theregional and global forecasts obtained by aggregating thesubmissions to this exercise from our regional andcountry economists. In the second section we address afew global economic issues from a top-down perspective.
Bottom-up view: a better 2010 
 
For the first time since the onset of the downturn we haverevised up our forecasts for economic growth. We nowexpect global growth to rise to 2.5% in 2010 compared to2.0% envisaged in our World Outlook from 30 March2010 (Table 1). The upward revision is due entirely tobetter prospects for industrial countries, where growthnext year is now seen to reach 1.0% compared to 0.3%before. The most dramatic revision has occurred in Japan(from -1.9% to +0.3%), but revisions in the US (+0.6percentage points) and the euro area (+0.5 percentagepoints) are also significant. Growth in emerging marketeconomies has remained unchanged at 4.5% (withupward revisions for China and Brazil offsetting downwardrevisions for Russia and a few smaller countries).Forecasts for inflation have increased as well, to a global(weighted) average of 2.4% from 1.9% previously.Upward revisions have affected both industrial andemerging market countries and reflected in particularexpectations of somewhat higher oil prices.
1. Economic Forecast Summary
 
GDP growth, % CPI inflation, %2008 2009F 2010F 2008 2009F 2010FG7
0.6 -3.9 1.0 3.2 -0.1 0.8
--US
1.1 -2.8 1.2 3.8 -0.5 0.8
--Japan
-0.7 -7.0 0.3 1.4 -0.8 -0.5
--Euroland
0.6 -4.3 0.8 3.3 0.3 0.9
EM Asia
6.8 4.2 5.8 6.5 1.3 2.9
--China
9.0 7.5 7.2 5.9 0.0 2.0
--India
7.3 5.5 6.0 8.7 3.5 5.1
EMEA
4.3 -3.3 2.9 12.6 9.3 8.5
--Russia
5.6 -4.4 1.8 13.3 11.2 10.3
Latam
4.4 -2.3 3.0 8.8 6.3 6.6
--Brazil
5.4 -1.0 4.0 4.6 4.2 4.2
Industrialcountries
0.7 -3.8 1.0 3.3 0.0 0.8
EMcountries
5.8 1.4 4.5 7.8 3.6 4.5
Global
2.9 -1.5 2.5 5.2 1.5 2.4
Source: DB Global Markets Research
Most of the upward revision to global growth in 2010results from improved expectations for investment growth(up to 2.0% from 0.1% previously) and export growth (upto 4.1% from -2.2%). Private consumption growth hasbeen left unchanged and government consumptiongrowth was reduced marginally (Table 2). The improvedprospects for exports and investment reflect greaterconfidence in the effectiveness of the authorities’ effortsto restore stability in the financial sector. Actions takenand commitments made to shore up financial institutionshave removed the risk of a major systemic failure, and theaggressiveness of macro policy measures have slowedthe descent of and begun to stabilize activity. The upwardadjustment of investment growth is driven by revisions inindustrial countries; forecasts of investment in emergingmarket countries have changed little on balance (Tables 3and 4). Exports have been revised up in both regions,reflecting the improved expectations for global trade.
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