EFTA Document EFTA01453243

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 2002 2002 2004 7016 2008 2010 7012 14444419:181049.40918 19•1111Gc4I co9surncOon =NI impal Smoot' CM Itombows therm LA Oeurnim Ftred mad 8.494444.4 —GC° net capital outflows, 2001-2013 is --. 10 § 0 • 4 .to -15 2001 2002 2C01 2004 2409 240. 2D1/ 20)8 2000 2010 2011 2012 2013 4940144.444 lea 14094 X405, %944 Mai and moonset tem 04.154 Sam Rota CM iNoanbeg4414e• LP, 00.0d• Nit 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. xicro to bare Mtn to bow Intomi on GOP. % yov Direct pp IlSobn case. US0bn case. %G0P G00 pp 'a"' Impact, Rig < <At..? :....: 2.4 Scenario 1 80 so 1.4 -1.0 1.4 -14 Scenario 2 100 70 3.3 -2.3 0.1 -3.3 Scenario 3 130 100 4.7 -3.3 -0.9 -4.7 Soon CM illarran Anna, LP Numb@ Sand mamas 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-0 110753 CONFIDENTIAL SDNY_GM_00256937 EFTA01453243