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Tel Aviv May 1st 2013

Jean-Michel Six Chief Economist, EMEA Standard & Poor’s

International Outlook: Monetary Policies and The Recovery In Housing

Markets

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A Double Dip In Developed Markets

2

US growth strengthens despite high unemployment and fiscal uncertainties • Housing and consumer spending (autos) continues responding to Fed easing • Supportive financial conditions (e.g., low rates rising equity markets), improving corporate profits, and low energy prices spur optimism and private spending Euro Area political uncertainty heighten structural vulnerabilities • Optimism fostered by “Draghi Put” (Outright Monetary Transactions) largely dissipated • Italy and Cyprus show political tensions and uncertainties have spilled into bank resolution and possibly future Euro Area policies • High debt burdens dampen domestic demand as de-leveraging stalls • Political/Structural impediments to viable currency union loom large

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Emerging Markets Expected to Bounce Back in 2013 and

Beyond

3

-8

-6

-4

-2

0

2

4

6

8

10

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

% year

Emerging

Markets

G7 & Emerging Markets: GDP growth

G7

F'cast

Source: National Sources, S&P Forecast

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US Leads Growth League in G7

4

Forecast

Real GDP Growth (% Change Y/Y)

Source: National statistical offices, S&P forecast

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US Housing Market Finally Bounces Back

5

100.00

110.00

120.00

130.00

140.00

150.00

160.00

170.00

180.00

190.00

200.00

0.00

100.00

200.00

300.00

400.00

500.00

600.00

2000

-Q1

2000

-Q3

2001

-Q1

2001

-Q3

2002

-Q1

2002

-Q3

2003

-Q1

2003

-Q3

2004

-Q1

2004

-Q3

2005

-Q1

2005

-Q3

2006

-Q1

2006

-Q3

2007

-Q1

2007

-Q3

2008

-Q1

2008

-Q3

2009

-Q1

2009

-Q3

2010

-Q1

2010

-Q3

2011

-Q1

2011

-Q3

2012

-Q1

2012

-Q3

2013

-Q1

2013

-Q3

2014

-Q1

2014

-Q3

2015

-Q1

2015

-Q3

S

t

a

r

t

s

0

0

0

s

Housing starts Case Shiller Price index (RHS)

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US companies enjoying much better credit availability

6

-25

-20

-15

-10

-5

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

US & Eurozone: Corporate loan growth% year

Source : Haver Analytics

US commercial & industrial loans

US loans inc. commercial real estate

Eurozone loans to PNFCs

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Central Banks Continue To Provide Support

7

Source: ECB, Bank of England, Federal Reserve, Q4 2012

Central Banks balance sheet as a % of Nominal GDP

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Eurozone:Transmission To the Real Economy Remains An Issue

8

Source: ECB; Data to February 2013

Loans to the private sector (% change Y/Y)

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Financial fragmentation has led to a “two-gear” monetary union

9

Source: ECB; Data to February 2013

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Capital Controls Within the EMU?

10

Source: ECB; data to Q4 2012

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Recent and Significant ECB Actions Eased Liquidity Pressures

11

Source: ECB, 5 April 2013

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Use of ECB Varies Greatly Across Euro Area Banking Industries

12

*Net borrowing position is total loans from ECB less deposits placed with ECB

Source: ECB, National central banks, S&P estimates, data to Jan. 2013

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United Kingdom – Housing Market

13

Sources: HM Revenue & Customs, BoE, OECD

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France – Housing Market

14

Sources: OECD, INSEE, ECB, Ministère de l’Ecologie du Développement et de

l’Aménagement du Territoire

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Ireland– Housing Market

15

Sources: OECD, ECB, Eurostat, Property Services Regulatory Authority, Central Statistics Office

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Spain – Housing Market

16

Sources: OECD, Banco de Espana, ECB, INE

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