EFTA Document EFTA01453230

7 March 2014 Special Report: Russia: macro implications of increased geopolitical risk Impact on growth In terms of the impact on growth, capital outflows will undermine investment activity with the funds taken off-shore rather than invested in new production facilities. The uncertainty over the political and economic situation in Ukraine as well as concerns over possible sanctions imposed on Russian businesses could further exacerbate costs. Figure 9: GDP growth and its components' dynamics, jFigure 10: Dynamics of real GDP, fixed investment and 1990-2013 15 10 5. .10 1008 1998 700) 2002 2004 7076 2008 2010 2012 I li140.9411.3184.011811101878 81•1111Gc4i co, surncOon 4•1111,rcal Swot 45111 amnion thaw* LA Omenim let MIMI Arco me merle* net capital outflows, 2001-2013 is --. 10 § 0 • 4 .to -15 2001 2002 2101 2004 2(08 920. 3001 2000 2000 2010 2011 2012 2013 9944.11999.441 bre 110DP .4000,11.949 4194s) ast44 meow/ tem 011454 Son Ma CM iNombeg 'wove M OIMM BM We base our analysis on the same capital outflow assumptions that we used in the previous section: • Base case: Capital outflows moderate to a level of USD30bn from USD62bn in 2013. • Scenario 1: Capital outflows intensify to USD60bn, the level of 2011-2013. • Scenario 2: Capital outflows intensify beyond the average levels of the past several years, to USD100bn. • Scenario 3: Capital outflows resemble 2008 and reach USD130bn. In Figure 11 we illustrate the impact of higher capital outflows on GDP growth. The 'direct impact' column illustrates the first-round effect from higher capital flight, while the 'impact' column also accounts for some second-round effects and the resulting improvement in the CA balance. [Figure IS: Impact of higher capital outflows on GDP growth, scenarios Can •AitIkree. xitro to bare xicht to bare Inipmi on GOP. % yov Direct USObn case. USOnn case. %GOP GDP. pp 'a"' Impact, pp 1' < .31'..? 2.<1 2.4 Scenario 1 80 so 1.4 -1.0 1.4 -IA Scenario 2 100 70 3.3 -2.3 0.1 -3.3 Scenario 3 130 100 4.7 -3.3 -0.9 -4.7 Son OM( itimertsig linnet LA Numb@ Bat ans. Our analysis suggests that capital outflows of USD60bn would prevent the Russian economy from staging a significant acceleration this year, with annual growth of 1.4% yoy vs. 1.3% yoy in 2013, 3.4% yoy in 2012 and 4.3% yoy in 2011. Deutsche Bank AG/London Page 5 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0110737 CONFIDENTIAL SDNY_GM_00256921 EFTA01453230