CEE Insights

Fixed Income and Foreign Exchange – 3 June 2011

Spot prices as of 03 June 2011

Croatia: Strong performance in April

Czech Republic: Final 1Q11 GDP closely watched

Hungary: Hungarian forint strengthens, despite

shaky global sentiment

Poland: Central bank’s rate-setting meeting will

be focus of next week

Romania: April retail sales disappoint

Turkey: Food inflation surprises on the upside

Ukraine: Ukraine may see governmental changes

CEE Insights – http://www.erstegroup.com

Market outlook
The coming week will be rich in data - May inflation, April industrial output and the final GDP data for 1Q (including
the breakdown) will be in focus across the region. Poland already published its GDP structure this week.
Consumption was again the main contributor (2.9pp) to overall GDP growth (4.4%) in 1Q, which is in line with the
tightening policy (75bp so far this year). It is very likely that the NBP will deliver another 25bp rate hike next week
and pause afterwards for the remainder of the year. The GDP structure for other CEE countries could bring more
evidence of a reversal of investment growth, which should positively contribute to GDP growth in all countries apart
from Croatia, where the economy has still been struggling. However, April retail sales and industrial output data
brought a little more optimism that the country could emerge from recession in 2Q. Industrial output data, due next
week for Hungary, the Czech Republic, Romania and Slovakia, should reveal whether the March deceleration was
a one-off or the start of a new trend. It will be very important to monitor inflation data, which is going to increase
further - up about 0.2pp on average. Next week, the Romanian MinFin will start a roadshow on for the issue of euro
medium-term notes (EMTNs) worth EUR 500mn to EUR 1.5bn, with a maturity of five years. If successfully placed,
these could trigger a temporary boost for the RON.

Rainer Singer (Co-Head CEE Macro/FI Research) rainer.singer@erstegroup.com

Juraj Kotian (Co-Head CEE Macro/FI Research) juraj.kotian@erstegroup.com

Juraj Kotian (Co-Head CEE Macro/FI Research) juraj.kotian@erstegroup.com

Rainer Singer (Co-Head CEE Macro/FI Research) rainer.singer@erstegroup.com
Spreads vs. Euroland
Instrument Current w/w m/m ytd
current - 1m 02/01/2011
EUR/CZK 24.46 0.4% -1.2% 2.4%
3Y (yield/bp) 2.19 -6 0 -5 38 38 120
Czech Republic 3.78 -6 -29 -12 77 77 94
10Y (yield/bp)
5Y CDS 76 0 0 -13
EUR/HRK 7.451 -0.1% -0.9% -0.9%
2Y (yield/bp) 3.67 6 -20 2 205 208 438
Croatia
10Y (yield/bp) 6.01 0 -12 -1 309 295 352
5Y CDS 267 2 19 9
EUR/HUF 265.3 0.9% 0.2% 4.8%
3Y (yield/bp) 6.62 -3 11 -110 481 435 668
Hungary
10Y (yield/bp) 7.20 -3 14 -75 419 376 499
5Y CDS 261 -2 23 -122
EUR/PLN 3.958 0.4% 0.1% -0.1%
3Y (yield/bp) 5.16 -7 -11 6 334 311 405
Poland
10Y (yield/bp) 6.02 -7 -8 -3 301 281 309
5Y CDS 145 -3 -2 3
EUR/RON 4.133 -0.1% -0.5% 3.6%
Romania 5Y (yield/bp) 7.43 -1 -4 22 513 478 538
5Y CDS 235 2 12 -57
3Y (yield/bp) 2.98 0 -15 37 115 107 157
Slovakia 9Y (yield/bp) 4.48 1 -16 26 147 139 132
5Y CDS 82 -1 1 0
EUR/TRY 2.30 -0.2% -1.8% -10.3%
2Y (yield/bp) 8.80 -17 28 172 582 661 622
Turkey
10Y (yield/bp) 9.52 -4 10 n.a. 622 612 n.a.
5Y CDS 167 -1 17 26
EUR/UAH 11.58 -1.4% 0.3% -7.9%
Ukraine 2Y (yield/bp) 9.4 40 20 -260 775 732 1114
5Y CDS 450 -16 23 -63
Source: Reuters, Bloomberg (+ means strengthening / - means easing of the exchange rate)
Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 2
CEE Insights – http://www.erstegroup.com

Positions
No trading idea at the moment.

Rationale at inception

Closed positions
# Recommendation opened closed P/L inc.carry
1 long: PLGB10y / 4m Euribor 16/09/2005 27/10/2005 -3.0%
2 short: CZGB15y / 6m PRIBID 16/09/2005 21/11/2005 6.0%
5 long: SKK/CZK 09/11/2005 20/01/2006 1.9%
3 short EUR/SKK 29/09/2005 07/02/2006 3.5%
4 EUR/PLN options 21/10/2005 28/07/2006 -2.7%
6 SKK/CZK long 23/03/2006 30/10/2006 2.2%
7 FRA 9*12 short 28/07/2006 08/11/2006 8bp
8 long HUGB 5y 13/10/2006 29/01/2006 5.7%
9 short CZGB/ long GDBR 09/01/2007 27/02/2007 1.8%
10 long CZK/EUR 27/02/2007 19/03/2007 2.3%
11 short CZGB/ long PLGB 07/03/2007 10/05/2007 5.5%
14 long SKKFRA 9x12, short EURFRA 9 16/07/2007 13/08/2007 30 bp
13 short EUR/CZK 07/06/2007 14/09/2007 3.0%
15 short EUR/RON 23/10/2007 21/11/2007 -4.9%
12 short EUR/SKK 04/06/2007 04/12/2007 1.6%
16 long USD/CZK 29/11/2007 14/01/2008 -3.1%
17 long 3y HUGB / 3m Pribor 05/12/2007 08/02/2008 -6.8%
20 short EUR/SKK 22/01/2008 13/02/2008 2.9%
19 long USD/CZK 21/01/2008 18/02/2008 -3.6%
18 short EURRON 31/12/2008 28/02/2008 -0.6%
21 Short USD/RON 02/04/2008 10/04/2008 3.9%
22 Buy EU RFRA, sell SKKFRA 04/04/2008 18/04/2008 26bp
23 Long EUR/CZK 29/04/2008 19/06/2008 -3.8%
24 short EUR/RON 05/08/2008 14/10/2008 -4.7%
25 short EUR/PLN 09/09/2008 21/10/2008 -3% (stop-loss)
27 short GEGB/long CZGB 12/08/2009 22/10/2009 4.9%
28 long 4y HUGB / 6m Euribor 08/09/2009 18/11/2009 7.4%
26 short EUR/PLN 12/08/2010 14/01/2010 5.5%
30 Short EURCZK 05/01/2010 17/01/2010 3.2%
33 Short EURPLN 20/05/2010 18/08/2010 6.0%
31 Long 5yr ROGB 08/02/2010 18/08/2010 2.4%
32 Long 2yr CZ Swap 10/03/2010 10/09/2010 -0.5%
29 short 10CZGB/long 10PLGB 19/12/2009 19/10/2010 0.6%
34 short Euribor6M/long 3YROGB 10/02/2011 09/05/2011 5.1%
To be included in the trading ideas mailing list, please, mail to
rainer.singer@erstebank.at, subject: trading ideas
Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 3
CEE Insights – http://www.erstegroup.com

Question of the week

How much are investment dynamics going to change this year and why?

In Romania, after falling by 2.9% y/y in 1Q11, investments should enter positive territory later this year, due to the
start of some ambitious infrastructure projects and the development of new production facilities in manufacturing.
We forecast the full-year growth at about 3-4%.
Eugen Sinca, Banca Comerciala Romana

In Turkey, investment growth (30% y/y) was the main driver of GDP growth in 2010, contributing 6pp to 8.9% GDP
growth. Though it seems likely to keep growing in the first quarter of 2011, leading indicators such as capacity
utilization and machinery and equipment production point to a slowdown for the remainder of the year. This would
not be in the form of a contraction, but we expect a cut of the investment pace to low double-digit growth in 2011,
partly due to base effects and partly due to the expected cooling off in the economy.
Ozlem Derici, Erste Securities Istanbul

After a decline of 30% in 2009, investments in Slovakia grew by 13% in 2010 and we expect them to increase
further, by around 8%, this year. Fixed investments should be supported by new investments in the automotive and
electronics industries. While a higher accumulation of stock contributed more to the GDP growth in 2010 than fixed
investments, we expect fixed investments to be the somewhat more dominant driver in 2011.
Maria Valachyova, Slovenska sporitelna

Having fallen in 2008 (-1.5%), 2009 (-7.9%) and 2010 (-4.6%), fixed investment in the Czech Republic will reverse
the trend and we expect it to rise at around 3-4% this year. The reasons for this include rising capacity utilization,
relaxed financing conditions and pent-up investments (some replacement investments need to be done, as they
cannot be postponed indefinitely).
Martin Lobotka, Ceska sporitelna

After the decrease of fixed capital formation in Hungary in 2010 by 5.4%, we expect a small, 2% increase this
year. 1Q11 investment statistics clearly reflect the duality in the Hungarian economy. While manufacturing
investments (tied mainly to export related industry) expanded 38% y/y, investments that can mainly be tied to the
domestic economy performed poorly. While, in the coming 1-2 years, investments in manufacturing may remain
elevated, due to the announced investments by car manufacturers, construction may remain sluggish, although a
very slight revival may also come in this branch this year.
Zoltan Arokszallasi, Erste Bank Hungary

In Ukraine, real investment may rise by around 10% y/y in 2011 (in 2010, it rose 5%). The main reason is
preparation for the EURO 2012 football championship, with investments worth 12% of GDP, half of which is to be
spent in 2011. Also, business confidence and the ease of getting a loan continue to improve.
Maryan Zablotskyy, Erste Bank Ukraine

The data released this week suggest that, last year, fixed investment in Poland contracted 1.0% y/y, compared to
the originally released -3.0%. Based on revised data, a quick recalculation suggests that, this year, fixed
investment growth should accelerate to about 4.5%. This has been indicated by the gradually increasing capacity
utilization (which, though improved, has still not returned to pre-crisis levels). Non-negligible support in 2011 will
also come from the public sector, which will continue investing in projects co-financed by EU funds. We expect
fixed investment to provide the second most important (after household consumption) support to growth this year.
Jana Krajcova, Ceska sporitelna

Investment momentum remains weak in Croatia, given the still troubled construction activity performance and the
private sector being reluctant to enter a new investment cycle, given the still very fragile economic outlook. Some
stabilization is expected in the coming quarters through the base effect and end to the sentiment deterioration, but
we expect another negative figure on the FY11 level (-1.9% y/y).
Alen Kovac, Erste Bank Croatia

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 4
CEE Insights – http://www.erstegroup.com

Major markets
This week’s data set the tone
After the important data released this week, next week’s issuance calendar is rather thin. This week’s disappointing
labor market data, together with the ISM index, which decreased from 60.4 to 53.5, and another high number for
the initial jobless data, cast doubts on the recovery of the US economy. Economic sentiment is unlikely to recover
next week. Thursday will bring the usual initial jobless claims. Initial jobless claims increased strongly in April, and
came down again in May, though not reaching previous low levels. Even if the upcoming number should show an
improvement, the markets will remain skeptical, after the slew of disappointing data during recent weeks. Also
scheduled for next week are the Fed’s Beige Book on Wednesday and the trade balance on Thursday. Neither is
likely to have any market impact.

Following along with the decrease of oil prices (in euro), German and, to a lesser extent, eurozone inflation rates
decreased in May. Furthermore, even though the German unemployment rate decreased slightly further, the
eurozone rate remained stable, at 9.9%, in contrast to our expectations. Both of these facts taken together
decrease the likelihood of a July rate hike at the forthcoming meeting of the ECB. After the very strong 1Q GDP
figures, the components of which we will get next Wednesday, we expect a slowdown in growth rates in the second
quarter. This could already be reflected in next week’s release of industrial production figures for France and
Germany, in accordance with sentiment decreases visible in the PMIs. The ECB will also release new staff
projections, which should give further hints for the medium-term rate outlook. Finally, we expect the bank to
announce a continuation of the very generous liquidity provision of up to three months. Besides the macro data, the
markets will be mostly focused on the announcements to be made about Greece (Troika report, possible expansion
of financing), that could overshadow economic news in the eurozone over the next week.

Mildred Hager, Erste Group, mildred.hager@erstegroup.com

Rainer Singer, Erste Group, rainer.singer@erstegroup.com

Forecasts

Intervention Rate 3m Money Market Rate 10y Govt. Yield FX

EUL USA EUL Fwd USA Fwd EUL USA EUR/USD Fwd
Spot 1.25 0 - 0.25 1.44 0.25 3.01 3.01 1.450
Jun 11 1.25 0 - 0.25 1.60 1.58 0.40 0.31 3.40 3.60 1.35 1.449
Sep 11 1.50 0 - 0.25 2.11 2.08 0.60 0.64 3.50 3.70 1.30 1.445
Dec 11 1.75 0.50 2.48 2.45 0.80 0.96 3.60 3.80 1.30 1.441
Mar 12 2.00 0.75 2.46 2.56 1.00 1.12 3.60 3.90 1.30 1.436

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 5
CEE Insights – http://www.erstegroup.com

Croatia
Strong performance in April
After a disappointing March, the monthly-frequency indicators showed robust performance in April. Industrial
production finally reverted to the positive region, growing 2.7% y/y (supported by capital and non-durable goods),
after a 5% y/y slump in 1Q and showing that solid order book performance kicked into the figures. Solid EU growth
momentum suggests favorable external order book performance, while we remain fairly cautious on the still fragile
domestic demand recovery. The coming months should reveal more on the sustainability of the April data, although
we are anticipating some stabilization (growth rates in the modest positive region) after the 1Q slump.
The trade balance also offered a positive surprise on robust exports performance (+34% y/y), while imports
performed in line with expectations, i.e., being virtually flat on an annual level and translating into a 71.7% exports-
imports coverage ratio. On top of steady industrial supplies performance, exports were supported by strong fuels
and capital goods (heavily supported by ship-related one-offs) performance. On the imports side, capital goods
imports confirmed weakness, while fuel imports continued to create the strongest pressure (in line with global oil
price developments). With an expected exports recovery in 2Q, after a mediocre 1Q, and with still modest imports
picking up, we see the net exports contribution reverting back to the positive region in 2Q.
The positive picture was rounded off with a strong 3.7% y/y retail trade growth, hence suggesting some
consumption rebound, after a 2% y/y decline in March. The figure has been supported by later Easter holidays, i.e.,
consumption shifting from March to April. Strong tourist season performance was also supportive (overnight stays
+25% y/y in April). The coming months are likely to bring some moderation, as the April figures were supported by
the abovementioned one-offs, although they are expected to maintain some mild positive tone, as the still fragile
labor market trends and consumer credit seem to cap any stronger upside potential.

T-bills rates performed robustly, HRK still fragile

After a three-week break, the MoF returned to the liquidity-flooded market with a hefty issuance (EUR 22mn and
HRK 1.180mn), aiming to keep the roll-over ratio close to 100%. As expected, market interest has been robust
(HRK 3bn), resulting in some MoF deviation from the planned issuance. The strong demand (2.27 bid-to-cover
ratio) also favored T-bill rates, as the benchmark 12M rate inched down 30bp (2.70%). EUR-linked T-bills issuance
remained well below maturing volumes (EUR 103mn vs. 22mn), suggesting ongoing depreciation pressures
stemming from declining EUR-linked T-bills stock. Some additional liquidity-driven T-bill rate drops could not be
ruled out, but we see limited potential for a more significant drop, with the 12M EUR-linked and 12M HRK rates
being aligned (105bp down from end-Feb). The exchange rate (currently around 7.45) continued to test 7.45
thresholds, slipping at one point towards 7.46-7.47, but still in very stable manner, thus the CNB remained on the
side-lines. The kuna outlook would remain burdened by the reduction of ST EUR-linked sovereign debt, although,
in the short term, we see tourist-related FX inflows and sovereign debt accumulation (upcoming Eurobond
placement) boosting some appreciation pressures in the coming period.
Alen Kovac, Erste Bank Croatia, akovac2@erstebank.com

Czech Republic
PMI confirmed slowdown seen elsewhere, remains in expansionary territory
PMI confirmed what was seen elsewhere in the (core) Eurozone, a slowdown from levels of around 60 to (the more
normal) level of 55.9. This comes as no surprise, as we have been saying that the slowdown in German
performance (especially exports) would come in 2H11, as pricier oil, tightening in emerging markets and the
stronger euro take a toll on German performance. The slowdown was across the board, with new orders, output,
hiring and (importantly, for the CNB) input/output prices contributing. This, as is almost always the case, did not
have any impact on the markets, but provides important insight into inflation over the summer (as any inflationary
pressures that may have until now been coming from the external environment have probably eased).

Final 1Q11 GDP closely watched

Next week, inflation, industrial production and final GDP for 1Q11 will be released. The CZK will probably not
respond to either of these, but the markets may push the yield curve down if inflation comes below expectations
(+0.3% m/m), even though the short-end already seems (from the baseline point of view) a bit too bearish.
However, the combination of falling yields in the EMU, the stable EU-CZ spread and anti-inflationary local data
(CPI over 1Q11, low household demand) may push the overall yield curve further down and even make it justified,
if the slowdown that we are now seeing in the real economy becomes more pronounced (which we do not now
expect). Final GDP will be important - not that the markets will respond and the figure itself should come close to
Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 6
CEE Insights – http://www.erstegroup.com

what we expected in the January quarterly (0.4% q/q) - but the structure will be revealing. We are curious to see
what impact on household consumption fiscal consolidation will have, and also to see whether fixed investments
reversed the three-year long slide and grew, as the relaxed financing conditions of banks and rising capacity
utilization seem to suggest.
Martin Lobotka, Ceska sporitelna, mlobotka@csas.cz

Hungary
Agreement announced between banks and government has no strong effect on growth
Details of the agreement between the banks and the government on the package to support troubled FX mortgage
debtors were announced on Monday. The package consists of five points: 1) fixing the CHF/HUF exchange rate at
180, EUR/HUF at 250 and JPY/HUF at 200 (per 100 JPY) for FX debtors until the end of 2014 (the difference
between the installments based on the official spot exchange rates and the beneficial rates remains the obligation
of the original debtor which he / she has to pay as of the beginning of 2015), 2) the moratorium on foreclosures and
evictions will be lifted, but repossessions can only take place to a limited extent, 3) the creation of the National
Asset Management Company (NAMC), which will start a homebuilding program to purchase flats from troubled
debtors, who will subsequently be able to continue living in their homes as renters, 4) EUR lending will again be
allowed, but only for people with a monthly income at least 15 times the minimum wage in EUR, and 5) a ‘home-
switching’ subsidy, which means that a troubled FX mortgage debtor who is willing to change to a smaller flat will
be given an interest rate subsidy for a maximum of five years and up to 3.5 percentage points. The news is mostly
in-line with earlier information but several details will only be fixed later (e.g., the eligibility criteria for debtors whose
flats will be bought by the NAMC). The fact that the moratorium will be lifted could help lending to restart in
Hungary, but the strict quotas for selling the real estate limits the speed with which the loan portfolios can be
‘cleaned’. The fixing of the FX rate may only create some minimal impetus to consumption, as probably a
considerable part of the debtors will not ask for this option, and people who eventually apply will most likely save a
significant part of the amount that is not to be paid to the banks for the grace period until the end of 2014. As for the
effects on the budget, EconMin Matolcsy indicated that the interest rate subsidy will be capped at HUF 1.5bn (only
EUR 5.6mn) per annum, while the purchase of housing by the NAMC will cost HUF 5bn p.a. There should also be
costs incurred by the homebuilding program, but we think that the overall effect on the budget will not be too
significant.

Hungarian forint strengthens, despite shaky global sentiment

The forint performed well this week, despite negative investor sentiment generated by ongoing debt woes in
Greece and disappointing macro releases from the US. The EUR/HUF dropped by 1 percent, to below 265, on
Friday. The high domestic interest rate, the ongoing faith in fiscal consolidation and the very strong trade balance
(the final March figure came in at a record high, almost reaching EUR 840mn, above the preliminary figure of
831mn) helps the exchange rate. Nevertheless, for the coming weeks, international sentiment may remain shaky;
therefore, further strengthening of the forint is also dependent on global sentiment remaining calm, in our view. As
for bonds, yields also decreased by around 5-10bp. At the bond auction yesterday, the Debt Management Agency
could again sell bonds above planned, as has occurred at several previous auctions. Last week, the Agency said
that Hungary may increase net planned HUF T-bond issuance this year by 44%, but recent healthy demand at the
bond auctions underpins the fact that Hungary may be able to conduct this plan. The good demand is still a sign of
investor confidence in the government’s fiscal plan, while the relatively high yield of Hungarian assets in the region
is also attractive. Nevertheless, we think that further considerable decrease of yields may only come if risks tied to
the government’s package ease.

Industrial production and trade balance figures to be released next week

The industrial output figure is to be released on Tuesday. Industry is expected to have increased by 11.1% in April,
after the disappointing 9.2% figure for March. The 3.6% m/m decrease posted for March may have also been
caused by unfortunate working-day effects, as industrial orders have still expanded at a healthy pace: new orders
rose 21.5% y/y. Nevertheless, later this year, we expect that the growth figures could permanently drop into single-
digit territory, due also to deteriorating sentiment in the German manufacturing sector. As for the trade balance
(scheduled for Thursday), the surplus of nearly EUR 840mn posted for March should narrow to EUR 570mn in
April. Nevertheless, this can simply be considered ‘normalization’ after the all-time high figure, and we should
continue to see very strong monthly surpluses for the rest of this year. The reason for this is not only strong export
performance: domestic demand (both investments and household consumption) is still sluggish, and imports thus
cannot catch up with exports.

Zoltan Arokszallasi, Erste Bank Hungary, zoltan.arokszallasi @erstebank.hu

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 7
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Poland
1Q data confirms domestic-driven growth, economy expanded by 1.0% q/q
Tuesday’s data release came out in line with expectations: in the first quarter of this year, the Polish economy
expanded by 4.4%, just a notch below the previous quarter’s 4.5%. The structure confirms that growth is driven by
domestic demand, with individual consumption contributing 2.6pp and total consumption 2.9pp. As expected, the
contribution from inventories weakened, while that of fixed investment was slightly higher (0.7pp) than in the
previous quarter (0.5pp). The contribution of net exports remained negative (-0.1pp), but less so than in 4Q10 (-
1.7pp). This is better than we expected, but we will have to wait and see what the long-awaited revision to the C/A
data will do to this number. After adjusting for seasonality, the Polish economy added 1.0% q/q, which is what we
expected and stronger than the 0.8% in the final quarter of 2010 (annually, this means 4.3% y/y). The data was in
line with expectations and, therefore, should not trigger any reaction from the MPC (although domestic-driven
growth plays into the hands of the hawkish wing of the MPC). It is important to see that the January VAT hike had
no visible impact on individual consumption, which has remained a robust pillar for growth and this should also be
the case also in the coming quarters (we could see some slowdown in 2012, however, if the government manages
to deliver further fiscal reforms). With regard to other components, we expect fixed investment to continue gaining
strength and to become one of the major growth drivers this year (along with individual consumption), while
inventories will enter the downward side of the cycle. Net exports will be a negative factor for growth this year.
Overall, we expect the economy to grow by 4.2% this year.

Central bank’s rate-setting meeting will be focus of next week

After the latest meeting, which surprised the markets with a rate hike, the governor has said that the council is
going for acceleration, rather than expansion of the tightening cycle. Comments between then and now also
confirm that the central bank expects inflation to start easing in the second half of the year (on base effect and oil
prices), but so far they maintain the tightening bias. From that point of view, a new prognosis might be crucial, as
one of the less-talkative members, Jerzy Hausner, suggested that, if the new projection were to reaffirm
expectations, the council might consider changing the bias to neutral. This would, in our view, make sense. On the
one hand, we have strong domestic demand (with no visible impact on inflation so far), while on the other, there
have already been 75bp of hikes delivered (which will take some time to show), the expected easing of inflation
and, most importantly, the fiscal consolidation that the government has been promising and which will weigh on
consumers and overall economic growth next year. With regard to our rate forecast, the central bank has already
delivered what we expected for this year, but stronger domestic demand, the weaker zloty and higher inflation,
justify, in our view, one more hike. This, we believe, is most likely to happen quickly (because, as some of the
members also pointed out, that would make it more effective and also because this is what the current mood of the
council seems to be) but afterwards, for the abovementioned reasons, rates should remain flat. Then, depending
on the economic situation and the nature of fiscal consolidation (how much the government will rely on short-term
measures and how much on real long-term sustainable reforms) tightening should continue at a moderate pace in
2012.
Jana Krajcova, Ceska sporitelna, jkrajcova@csas.cz

Romania
Fiscal deficit to be capped at 3%, new draft constitution
Romania's budget gap should not be wider than 3% of GDP, while public debt should not be higher than 60% of GDP,
according to a draft constitution released this week by the presidential administration. External borrowings should be
used solely for investments, except for in some exceptional cases, such as natural disasters that may affect public
finances. Both targets - the budget deficit and the public debt - could be temporarily overshot if the Parliament endorses
such a decision and if clear remedies are put in place so as to regain the budget deficit balance of 3% of GDP in the
next three years. The number of MPs will be capped at 300 and the Parliament will consist of a single chamber. Fiscal
and budgetary issues, such as the recent hike in VAT or the cut in public wages and social allowances, will no longer
be challenged in the courts by people affected by such measures. Over the last year, many people succeeded in
getting money back from the government and this created a difficult situation in terms of the expected results of the
fiscal consolidation program. In our opinion, these forward-looking moves are also a reflection of the new international
context, in which the issue of sovereign debts is high on the agenda. They will help the country remain balanced in
terms of public finances and also will lead to the more efficient allocation of public resources, which has been the bane
of Romania for too many years. Romania seems to have hit its stride with regard to the fiscal consolidation process,
managing to slash the budget deficit to 6.4% of GDP in 2010, from as high as 8.6% a year before (under ESA). The
new constitution should be approved by the Parliament, and then by the people, in a referendum which might be
scheduled for 2012.
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Government signals continuation of fiscal consolidation efforts ahead of EMTN issue

The deputy finance minister said that the new stand-by arrangement with the IMF and EU will ensure that Romania
avoids fiscal slippage ahead of the 2012 elections. At the same time, the government announced new concrete steps
this week to put public finances on a sustainable trajectory: 4,900 additional jobs will be cut in the public sector, some
bonuses received by policemen will be eliminated and social allowances will be granted only to people in real need,
according to a new law. The MinFin will start a roadshow on June 6 for the issue of euro medium-term notes (EMTNs)
worth EUR 500mn to EUR 1.5bn, with a maturity of five years. We expect the issue to be oversubscribed, as the
markets are confident that tough reforms followed under the agreement with the IMF and EU will yield positive effects.
The MinFin also plans to issue RON-denominated debt worth RON 4.3bn on the local market in June, including a 10-
year bond issue worth RON 600mn.

April retail sales disappoint

Although consumer sentiment indicator has been on an upward trend during recent months, April retail sales remained
weak. Retail sales (seasonally-adjusted data) fell 1.8% m/m and 6.2% y/y. Considering that real wages are in negative
territory, the economy started to create new jobs only in the last two months and consumer lending has not yet shown
signs of sustainable revival, we have the picture of still fragile households consumption. We stick to our scenario
regarding a flat key rate at 6.25% in 2011 and a gradual tightening of monetary policy in 2012, due to inflationary
pressures and the NBR’s need to counterbalance potential populist fiscal measures ahead of the 2012 elections.

Eugen Sinca eugen.sinca@bcr.ro

Turkey
Food inflation surprises on the upside
CPI inflation in May surprised on the upside and came in at 2.4%, higher than both our and market
expectations of around 0.95% and 1.1%, respectively. The deviation mainly stemmed from higher than
expected food inflation, which rose by 4.7% m/m, contrary to its usual seasonal weakness in May. The good
news is that the increase in prices was not broad-based, with food and the seasonally-rising clothing sector
making up some 2.1pp out of 2.4% monthly inflation. The pass-through from depreciation and high oil prices
also seemed to remain limited in May. Core inflation, excluding food and beverages, energy, tobacco and
gold (I-index) rose to 4.7% in May, from 4.4%, which was expected by the CBT and might be a reason for
the CBT to take the increase as transitory and wait for the second-round effects to be more visible before
taking any action against rising inflation. We will see how the CBT considers those price developments in its
inflation note on Monday, but we expect rate hike expectations of around 100bp from the CBT at the end of
the year to be brought forward by the market after this unfavorable reading. We technically increase our
year-end inflation expectation to 8.5%, from 7.5%, while the amount of volatility in food prices might bring
further adjustments in year-end inflation expectations on both sides. As the CBT does not think that
overheating in the economy is in the making right now, we do not think it would be in a hurry to raise policy
rates from its current level of 6.25%. Besides, it would refrain from raising short-term rates so as not to invite
a higher amount of short-term flows, which it is trying to avoid in order to sustain financial stability. However,
if second-round effects start to emerge and ongoing depreciation in TRY prevails - against which it would
first use the elimination of FX purchase auctions, before taking any other action - we might see a rate hike
from the CBT to contain inflation, rather than announcing a possible target revision, as in 2008. Note that, in
2008, the CBT revised the year-end targets for 2009 and 2010 from 4% to 6.5% and 5.5%, respectively, to
reduce the increasing credibility gap between actual and expected inflation rates.

Sort of an ease in import growth

The trade balance in April generated a USD 9.1bn deficit, close to our estimate of USD 8.8bn, but lower
than the market consensus of almost USD 10bn. Imports rose by 2.8% over the last month in seasonally-
adjusted terms, while the increase in exports stood at 9.2%. It is good to see some slowdown of sorts,
especially in non-energy imports, while we need to see whether this would turn into a downward trend,
contributing positively to the current account deficit. If this trend continues, it would contribute to the credit
growth as well, via lower financing needs, adding to the CBT’s credibility, as the CBT was insistently
saying that the impact of the new monetary policy would be seen in the second quarter.

Ozlem Derici, Erste Securities Istanbul, ozlem.derici@erstegroup.com

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 9
CEE Insights – http://www.erstegroup.com

Ukraine
Ukraine may see governmental changes
There was notable public criticism of Prime Minister Mykola Azarov from the president and the NBU governor
this week. The head of the NBU sent a letter to Azarov criticizing the loss of IMF support. There are now
rumors among politicians and the press that the criticism is part of a public campaign prior to the appointment
of a new government. It is possible that Ukraine may see new a prime minister appointed over the next few
weeks. It is completely in the power of the president to appoint a new government, as he enjoys the support of
around two thirds of the Parliament. Over the last year, the current government made strong improvements in
fiscal stabilization, as the budget deficit dropped from 9% of GDP in 2009 to 3.5% in 2011. It also introduced a
new tax code, making life harder for tax avoiders. However, it did not manage to push through stronger reforms
in the energy sector and pension system. Also, mainly due to food prices, the government, along with the
president and the Party of Regions, has been losing public support. In May 2010, the Party of Regions enjoyed
the support of 41.6% of the population – people willing to vote for them in an election - according to a
Razumkov Center survey. The April 2011 survey showed a decline in public support to just 15.7%. Now, only
11.3% of surveyed Ukrainians stated that they fully support the president’s actions; in the same period of last
year, public support was at 40.9%. Possible government changes may come as a move from the president to
start new popular policies and reverse the trend of declining public support. Possible governmental changes
are possible, but are still not a certainly in the often-changing political environment of Ukraine. Also, there are
no indications as to who could be the possible substitute or what the resulting economic policies could be. It is
thus premature to speculate on the possible impact on financial markets.

Maryan Zablotskyy, Erste Bank Ukraine, Maryan.Zablotskyy@erstebank.ua

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 10
CEE Insights – http://www.erstegroup.com

Capital markets forecasts

Exchange Rate vs EU R
CZK Fwd HRK Fwd HUF Fwd PLN Fwd RON Fwd TRY Fwd UAH Fwd
Spot 24.5 7.44 265.3 3.96 4.14 2.30 11.57
Jun-11 24.3 24.5 7.34 7.34 267.5 266.1 3.89 3.96 4.12 4.15 2.23 2.31 10.60 11.81
Sep-11 24.2 24.5 7.38 7.38 268.5 268.4 3.85 3.99 4.10 4.19 2.18 2.34 10.40 12.08
Dec-11 24.0 24.4 7.45 7.45 267.5 270.3 3.81 4.01 4.10 4.25 2.10 2.37 10.34 12.35
Mar-12 23.8 24.4 7.45 7.45 266.3 273.6 3.76 4.04 4.00 4.29 2.21 2.40 9.81 12.60

Intervention Rate 3M Money Market Rate

CZ HR HU PL RO TR UA CZ Fwd HU Fwd PL Fwd RO Fwd TR Fwd UA
Spot 0.75 6.00 6.00 4.25 6.25 6.25 7.75 1.20 6.10 4.45 5.54 8.44 5.64
Jun-11 0.75 6.00 6.00 4.50 6.25 6.25 7.75 1.01 1.25 6.10 6.15 4.70 4.64 5.70 6.13 8.00 8.85 4.00
Sep-11 1.00 6.00 6.00 4.50 6.25 6.25 7.75 1.25 1.42 6.10 6.15 4.70 4.89 6.10 6.43 8.50 8.94 4.50
Dec-11 1.25 6.00 6.00 4.50 6.25 7.00 7.75 1.45 1.61 6.10 6.15 4.80 5.13 6.30 6.72 9.00 9.28 5.50
Mar-12 1.25 6.00 6.00 4.50 6.50 7.50 7.75 1.73 2.13 6.10 6.19 4.80 5.20 6.50 7.19 9.00 9.69 5.80

10y Govt. Yield 5y Govt. Yield 2y Govt. Yield 2y Govt. Yield

CZ HR HU PL SK RO TR UA
Spot 3.78 6.01 7.20 6.03 4.49 7.58 8.93 9.40
Jun-11 4.00 6.00 7.10 6.10 4.60 7.30 8.50 8.80
Sep-11 4.20 6.00 7.00 6.20 4.60 7.20 9.00 8.50
Dec-11 4.25 6.00 7.00 6.20 4.60 7.20 10.50 8.50
Mar-12 4.35 6.00 6.90 6.10 4.60 7.10 10.50 8.50

Long-term forecasts
Real GDP growth (%) 2009 2010 2011f 2012f CPI (%), eoy 2009 2010 2011f 2012f
Croatia -6.0 -1.2 1.0 2.2 Croatia 1.9 1.8 3.8 3.3
Czech Republic -4.0 2.2 1.8 2.8 Czech Republic 1.0 2.3 2.2 2.8
Hungary -6.7 1.2 2.7 3.1 Hungary 5.6 4.7 3.9 3.0
Poland 1.7 3.8 4.2 4.0 Poland 3.5 3.1 2.7 2.4
Romania -7.1 -1.3 2.0 3.9 Romania 4.7 8.0 5.2 4.7
Serbia -3.1 1.8 3.0 3.8 Serbia 6.6 10.3 8.5 5.7
Slovakia -4.8 4.0 4.0 4.5 Slovakia 0.5 1.3 4.0 4.0
Turkey -4.8 8.9 6.0 4.5 Turkey 6.5 6.4 7.5 6.5
Ukraine -14.8 4.2 4.5 6.0 Ukraine 13.0 9.2 10.0 8.0
CEE8 average -3.8 2.3 3.2 3.8 CEE8 average 4.2 4.4 4.1 3.6
CEE8+Turkey -4.2 5.0 4.3 4.1 CEE8+Turkey 5.1 5.2 5.5 4.8
Unemployment (%) 2009 2010 2011f 2012f 3M rates (average, %) 2009 2010 2011f 2012f
Croatia 9.1 11.8 12.2 11.9 Croatia 8.9 2.4 2.1 3.0
Czech Republic 8.6 9.0 8.9 8.4 Czech Republic 2.2 1.3 1.4 2.1
Hungary 10.0 11.2 10.7 9.9 Hungary 8.6 5.5 6.1 5.7
Poland 11.0 12.1 11.5 10.1 Poland 4.3 3.8 4.4 5.0
Romania 6.9 7.3 6.9 6.8 Romania 11.7 6.8 6.0 6.6
Serbia 16.1 19.2 19.0 18.5 Serbia 14.4 10.8 13.0 10.5
Slovakia 12.1 14.4 12.9 12.0 Slovakia 1.2 0.8 1.5 2.4
Turkey 14.0 11.9 11.0 11.0 Turkey 9.9 7.5 8.0 9.0
Ukraine 8.8 8.1 7.8 7.5 Ukraine 18.0 7.7 4.5 5.1
CEE8 average 9.9 10.9 10.5 9.7 CEE8 average 7.0 4.3 4.3 4.7
CEE8+Turkey 11.6 11.3 10.7 10.2 CEE8+Turkey 8.2 5.6 5.8 6.5
C/A (%GDP) 2009 2010 2011f 2012f Budget Balance (%GDP) 2009 2010 2011f 2012f
Croatia -5.5 -1.4 -2.5 -3.3 Croatia -4.5 -5.0 -5.9 -5.5
Czech Republic -3.2 -3.8 -3.3 -3.2 Czech Republic -5.8 -5.3 -4.5 -3.7
Hungary 0.4 2.1 1.5 0.6 Hungary -4.5 -4.2 2.6 -2.9
Poland -2.1 -3.4 -4.4 -4.8 Poland -7.1 -7.8 -6.0 -3.7
Romania -4.2 -4.1 -4.9 -4.8 Romania -8.6 -7.3 -4.7 -4.0
Serbia -6.9 -7.0 -7.4 -8.1 Serbia -4.3 -4.5 -4.1 -3.5
Slovakia -3.6 -3.3 -2.3 -2.9 Slovakia -8.0 -7.9 -5.0 -4.0
Turkey -2.3 -6.6 -8.5 -6.2 Turkey -5.5 -3.6 -2.3 -2.3
Ukraine -1.7 -1.9 -2.2 -3.0 Ukraine -6.3 -5.5 -3.5 -2.5
CEE8 average -2.7 -2.8 -3.3 -3.7 CEE8 average -6.6 -6.5 -4.3 -3.7
CEE8+Turkey -2.5 -4.4 -5.5 -4.7 CEE8+Turkey -6.2 -5.3 -3.5 -3.1

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 11
CEE Insights – http://www.erstegroup.com

Looking ahead
Country Date Release/event/figures Our expectation Consensus* Prior
Czech Republic 6-Jun Industrial output, Apr, % y/y 7.1 8
6-Jun Trade balance, Apr, CZK bn. 17 14.8
8-Jun Unemployment rate, Apr, % 8.1 8.2
9-Jun CPI, Apr, % y/y 1.8 1.8
9-Jun GDP 1Q F, % q/q 0.6 0.6
Croatia 8-Jun May PPI +7.5% y/y +8.1% y/y
Hungary 7-Jun Industrial prodution (April, y/y) 11.1% 8.8% 9.2%
9-Jun Trade balance (April) EUR 570mn EUR 562.8mn EUR 839.7mn
9-Jun 1Q11 GDP detailed (y/y; q/q) 2.4% / 0.7% n.a. 2.4% / 0.7% (flash)
Poland 8-Jun NBP rates, % 4.5 4.5
Romania 8-Jun GDP 1Q11 - detailed press release 0.6% q/q / 1.6% y/y - 0.1%q/q / -0.6% y/y
8-Jun IPI - April (%, y/y s.a.) 9.6 - 7.4
9-Jun Foreign trade balance - April (EUR million) -750.0 - -806.0
10-Jun CPI - May 0.3% m/m / 8.5% y/y - 0.7%m/m / 8.3% y/y
Slovakia 8-Jun Detailed GDP estimate 3.5% y/y 3.5% y/y 3.5%
8-Jun April industrial production 6.5% y/y - 6.8%
9-Jun April foreign trade EUR 168m EUR 144m EUR 136m
Turkey 8-Jun Industrial Production, Apr-11 10.4%
10-Jun Consumption Index, May-11 18.0%
Ukraine 7-Jun May CPI, m/m 1.0% 0.8% 1.3%
*Sources: Bloomberg, Reuters

Auction diary
Country Auction-date Pay-date Maturity Cupon Offer Forecast
Czech Republic 8-Jun 13-Jun May-25-2024 CZK 6bn
9-Jun 10-Jun Jun-08-2012 CZK 8bn
Hungary 7-Jun 8-Jun Sep-14-2011 HUF 50bn 5.90%
9-Jun 8-Jun May-02-2012 HUF 50bn 5.90%
Poland 9-Jun 13-Jun n.a. PLN 1.5-3.0bn
Romania 6-Jun 8-Jun-11 6-Jun-12 - RON 1,200mn 6.90%
9-Jun 14-Jun-11 25-Oct-14 6.3% RON 500mn 7.30%
Slovakia No auction scheduled
Turkey 7-Jun 8-Jun 2013-Feb-20
7-Jun 8-Jun 2014-Jun-04
Ukraine 7-Jun 1-Jun 2011-Dec-09 7.00%
7-Jun 1-Jun 2012-Jun-06 9.00%
7-Jun 1-Jun 2014-Jun-06 10.00%

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 12
CEE Insights – http://www.erstegroup.com

Exchange rates and interest rates (52 weeks)

8.0 Croatia 28 Czech Republic 1.26

7.5 26
1.24
24
7.0
22 1.22
6.5
20
6.0 1.20
18
5.5
16 1.18
5.0 14 CZK/EUR
HRK/EUR CZK/USD 1.16
4.5 12
HRK/USD 3m interbank rate, r.s.
4.0 10 1.14
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

300 Hungary 7.0 4.5 Poland 4.6

280
6.0 4.4
260 4.0

240 5.0 4.2

3.5
220
4.0 4.0
200 3.0
3.0 3.8
180
2.5
160 2.0 3.6
HUF/EUR PLN/EUR
140 2.0
HUF/USD 1.0 PLN/USD 3.4
120 3m interbank rate, r.s.
3m interbank rate, r.s.
100 0.0 1.5 3.2
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

5.0 Romania 8.0 30 Slovaki 1.6

7.0 1.4
4.5 25
6.0 1.2
4.0 20
5.0 1

3.5 4.0 15 0.8

3.0 0.6
3.0 10
2.0 0.4
RON/EUR SKK/USD
2.5 5
RON/USD 1.0 3m interbank rate, r.s. 0.2
3m interbank rate, r.s.
2.0 0.0 0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

2.4 Turkey 9.0 13.0 Ukraine 40

8.5 12.0 35
2.2
8.0 11.0
30
2.0 7.5
10.0
25
1.8 7.0
9.0
6.5 20
1.6 8.0
6.0 UAH/EUR 15
7.0
1.4 5.5 UAH/USD
3m interbank rate, r.s. 10
TRY/EUR 6.0
5.0
1.2 TRY/USD 5.0 5
4.5
3m interbank rate, r.s.
1.0 4.0 4.0 0
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

Source: Bloomberg

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 13
CEE Insights – http://www.erstegroup.com

Benchmarks
7.0 4.0
4 Czech Republic 1
Croatia
3.5 0.8
6.0 3.0
3
5.0 0.6
2.0
2.5
4.0 0.4
1.0 2
3.0 0.2
1.5
0.0
2.0 0
1
1.0 -1.0
0.5 -0.2

0.0 -2.0 0 -0.4

3m 1yr 3yr 5yr 9yr 3m 1yr 3yr 5yr 10yr
Spread to Euroland, r.s. Yields Spread to Euroland, r.s. Yields

8.0 Hungary 4.9 Poland

7.0 3.4
4.8
7.0
4.7 6.0 3.3
6.0 4.6
5.0 3.2
5.0 4.5
4.4 4.0 3.1
4.0
4.3
3.0 3.0
3.0 4.2
4.1 2.0 2.9
2.0
4.0
1.0 1.0 2.8
3.9
0.0 3.8 0.0 2.7
3m 1yr 3yr 5yr 10yr 3m 1yr 3yr 5yr 10yr
Spread to Euroland, r.s. Yields
Spread to Euroland, r.s. Yields

5.0 1.6 9.6 Turkey 7.2

Slovakia
4.5 9.4 7.0
1.4
4.0 9.2 6.8
1.2
3.5 6.6
9.0
3.0 1.0
6.4
8.8
2.5 0.8 6.2
8.6
2.0 0.6 6.0
1.5 8.4
5.8
0.4
1.0 8.2 5.6
0.5 0.2
8.0 5.4
0.0 0.0
7.8 5.2
3m 1yr 3yr 5yr 9yr
3m 1yr 2yr 5yr 10yr
Spread to Euroland, r.s. Yields
Spread to Euroland, r.s. Yields

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 14
CEE Insights – http://www.erstegroup.com

Contacts
Group Research Research, Slovakia
Head of Group Research Head: Juraj Barta, CFA (Fixed income) +421 2 4862 4166
Friedrich Mostböck, CEFA +43 (0)5 0100 - 11902 Michal Musak (Fixed income) +421 2 4862 4512
Macro/Fixed Income Research Maria Valachyova (Fixed income) +421 2 4862 4185
Head: Gudrun Egger, CEFA (Euroland) +43 (0)5 0100 - 11909 Research, Ukraine
Mildred Hager (SW, JP, Euroland) +43 (0)5 0100 - 17331 Head: Maryan Zablotskyy (Fixed income) +38 044 593 - 9188
Alihan Karadagoglu (Corporates) +43 (0)5 0100 - 19633 Ivan Ulitko (Equity) +38 044 593 - 0003
Peter Kaufmann (Corporates) +43 (0)5 0100 - 11183 Igor Zholonkivskyi (Equity) +38 044 593 - 1784
Carmen Riefler-Kowarsch (Corporates) +43 (0)5 0100 - 19632 Treasury - Erste Bank Vienna
Rainer Singer (US) +43 (0)5 0100 - 11185 Saving Banks & Sales Retail
Elena Statelov, CIIA (Corporates) +43 (0)5 0100 - 19641 Head: Thomas Schaufler +43 (0)5 0100 - 84225
Macro/Fixed Income Research CEE Equity Retail Sales
Co-Head CEE: Juraj Kotian (Macro/FI) +43 (0)5 0100 - 17357 Head: Kurt Gerhold +43 (0)5 0100 - 84232
Co-Head CEE: Rainer Singer (Macro/FI) +43 (0)5 0100 - 11185 Fixed Income & Certificate Sales
CEE Equity Research Head: Uwe Kolar +43 (0)5 0100 - 83214
Co-Head: Günther Artner, CFA +43 (0)5 0100 - 11523 Treasury Domestic Sales
Co-Head: Henning Eßkuchen +43 (0)5 0100 - 19634 Head: Markus Kaller +43 (0)5 0100 - 84239
Günter Hohberger (Banks) +43 (0)5 0100 - 17354 Corporate Sales AT
Franz Hörl, CFA (Steel, Construction) +43 (0)5 0100 - 18506 Head: Christian Skopek +43 (0)5 0100 - 84146
Elisabeth Springer, (Banks, Real Estate) +43 (0)5 0100 - 11903
Daniel Lion, CIIA (IT) +43 (0)5 0100 - 17420 Fixed Income & Credit Institutional Sales
Christoph Schultes, CIIA (Insurance, Utility) +43 (0)5 0100 - 16314 Institutional Sales International
Thomas Unger; CFA (Oil&Gas) +43 (0)5 0100 - 17344 Head: Christoph Kampitsch +43 (0)5 0100 - 84979
Vera Sutedja, CFA (Telecom) +43 (0)5 0100 - 11905 Institutional Sales Austria
Vladimira Urbankova, MBA (Pharma) +43 (0)5 0100 - 17343 Head: Thomas Almen +43 (0)50100 - 84323
Martina Valenta, MBA (Real Estate) +43 (0)5 0100 - 11913 Martina Fux +43 (0)50100 - 84113
Gerald Walek, CFA (Machinery) +43 (0)5 0100 - 16360 Michael Konczer +43 (0)50100 - 84121
International Equities Margit Hraschek +43 (0)50100 - 84117
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Stephan Lingnau (Europe) +43 (0)5 0100 - 16574 Head: Jürgen Niemeier +49 (0)308 105 800 - 5503
Ronald Stöferle (Asia) +43 (0)5 0100 - 11723 Marc Friebertshäuser +49 (0)711 810 400 - 5540
Editor Research CEE Sven Kienzle +49 (0)711 810 400 - 5541
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Research, Croatia/Serbia Sabine Loris +49 (0)711 810 400 - 5543
Head: Mladen Dodig +381 11 22 09 178 Ingo Lusch +43 (0)50100 - 85520
Alen Kovac (Fixed income) +385 62 37 1383 Rene Klasen +49 (0)308 105 800 - 5521
Anela Tomic (Fixed income) +385 62 37 2295 Klaus Vosseler +49 (0)711 810 400 - 5560
Davor Spoljar (Equity) +385 62 37 2825 Milosz Chrustek +43 (0)50100 - 85522
Research, Czech Republic Andreas Goll +49 (0)711 810 400 - 5561
Head: David Navratil (Fixed income) +420 224 995 439 Mathias Gindele +49 (0)711 810 400 - 5562
Petr Bittner (Fixed income) +420 224 995 172 Institutional Solutions
Petr Bartek (Equity) +420 224 995 227 Head: Zachary Carvell +43 (0)50100 - 83308
Vaclav Kminek (Media) +420 224 995 289 Brigitte Mayr +43 (0)50100 - 87481
Jana Krajcova (Fixed income) +420 224 995 232 Institutional & High End Sales
Martin Krajhanzl (Equity) +420 224 995 434 Head: Patrick Lehnert +43 (0)5 0100 - 84259
Radim Kramule (Oil&Gas) +420 224 995 213 Antony Brown +44 20 7623 - 4159
Martin Lobotka (Fixed income) +420 224 995 192 Ulrich Inhofner +43 (0)50100 - 84324
Lubos Mokras (Fixed income) +420 224 995 456 Simone Pilz +44 20 7263 - 4159
Research, Hungary Institutional Sales CEE
Head: József Miró (Equity) +361 235-5131 Head: Jaromir Malak +43 (0)50100 - 84254
Bernadett Papp (Equity) +361 235-5135 Sales CEE
Gergely Gabler (Equity) +361 253-5133 Head: Jaromir Malak +43 (0)50100 - 84254
Zoltan Arokszallasi (Fixed income) +361 373-2830 Piotr Zagan +43 (0)50100 - 84256
Research, Poland Ciprian Mitu +43 (0)50100 - 84253
Magda Zabieglik (Equity) +48 22 330 6250 Institutional Sales Slovakia
Tomasz Kasowicz (Equity) +48 22 330 6251 Head: Peter Kniz +421 2 4862-5624
Piotr Lopaciuk (Equity) +48 22 330 6252 Sarlota Sipulova +421 2 4862-5629
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Bianka Madej (Equity) +48 22 330 6260 Head: Ondrej Cech +420 2 2499 - 5577
Research, Romania Pavel Zdichynec +420 2 2499 - 5590
Head: Lucian Claudiu Anghel +40 21 312 6773 Milan Bartos +420 2 2499 - 5562
Mihai Caruntu (Equity) +40 21 311 2754 Radek Chupik +420 2 2499 - 5565
Dorina Cobiscan (Fixed Income) +40 21 312 6773 1028 Institutional Sales Croatia
Dumitru Dulgheru (Fixed income) +40 21 312 6773 1028 Head:Darko Horvatin +385 (0)6237 - 1788
Eugen Sinca (Fixed income) +40 21 312 6773 1028 Natalija Petljak +385 (0)6237 - 1638
Raluca Ungureanu (Equity) +40 21311 2754 Institutional Sales Hungary
Research Turkey Norbert Siklosi +36 1 235 - 5842
Head: Erkin Sahinoz (Fixed Income) +90 212 371 2540 Institutional Sales Romania
Sevda Sarp (Equity) +90 212 371 2537 Head: Valentin Popovici +40 21 310-4449 - 59
Evrim Dairecioglu (Equity) +90 212 371 2535 Ruxandra Carlan +40 21 310-4449 - 612
Ozlem Derici (Fixed Income) +90 212 371 2536
Duygu Kalfaoglu (Equity) +90 212 371 2534
Mehmet Emin Zumrut (Equity) +90 212 371 2539

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 15
CEE Insights – http://www.erstegroup.com

Published by Erste Group Bank AG, Neutorgasse 17, 1010 Vienna, Austria.
Phone +43 (0)5 0100 - ext.

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This research report was prepared by Erste Group Bank AG (”Erste Group”) or its affiliate named herein. The individual(s) involved in the preparation of the report
were at the relevant time employed in Erste Group or any of its affiliates. The report was prepared for Erste Group clients. The information herein has been obtained
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Please refer to www.erstegroup.com for the current list of specific disclosures and the breakdown of Erste Group’s investment recommendations.

Erste Group Research - CEE Insights Fixed Income and Foreign Exchange – 3 June 2011 Page 16