This document summarizes the economic outlook for 2013, noting several downside risks. The global economy faces risks from the ongoing Eurozone crisis, slowing growth in China, and uncertainty in the United States due to fiscal and political issues. While some Asian countries have shown resilience, the overall economic outlook for the region remains negative as growth decelerates in key countries like China. The document concludes that the global economy is entering a period of higher risks and that Asian companies will be affected.

1. MAPPING THE ECONOMY IN 2013:
DOWNSIDE RISKS PROLIFERATE
THE CPA CONGRESS 2012
SINGAPORE
11th October 2012
Manu Bhaskaran
Centennial Group

2. IN A NUTSHELL
Multiple risks affect 2013 outlook
 Global economy at risk
 Middle East risks at critical point
 Euro crisis: only palliatives
 US: decelerating, fiscal/political risks
 Asia has not decoupled
 Chinese economy slowing
 Key for Asia is resilience
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3. GLOBAL ECONOMY:
HOW SEVERE ARE THE
DOWNSIDE RISKS?
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4. KEY DRIVERS
Global drivers affecting mostly negative
Country % Outlook
world
GDP
US 23.1 Relatively better but headwinds remain
Eurozone 19.3 Worse: Recession despite ECB etc
actions
China 9.3 Worse: Significant deceleration,
imbalances pose major risk
Japan 8.7 Rebound less than hoped
Other 8.3 Worse: clear signs of slowdown
emerging 4

5. SNAPSHOT OF GLOBAL ECONOMY
Despite market optimism, global economy looks fragile
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6. WHY POLICY IS NOT ENOUGH
Pure monetary action is not enough
 Lagged effects but slowdown underway
 Incremental effect of lower rates small
 Cost of capital is not the problem
 Duke University Survey
 Easy money can’t cure main obstacles
 Regulatory and uncertainty
 Fiscal drag
 Risk of unintended consequences rising
 Woodford/White paper
6

7. US: MIXED, REMAINS FRAGILE
Foundations for recovery built but …
 Some key areas recovered, not all
 +: Credit (weakly), housing (tentatively)
 +: Creative destruction/re-engineering
 -: Savings rate: still 3.5-4.5% not 8% needed
 But drags remain
 Fiscal drag in 2013 will be large
 Political gridlock
 Eurozone hurts
 Housing could be set back temporarily
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8. EUROZONE: PROGRESS BUT RISKY
Expect more episodes of stress
 Eurozone actions limit tail risks
 Political commitment clearer
 Addressing flaws in original set up
 Firepower built up
 But too late to help economy
 Fiscal drag is strong, 2012-13
 Political backlashes are mounting
 Spain: secession fears raised, Catalonia
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9. JAPAN: NOT AS BAD
Some positives building, cyclical risks
 Short term: negative to Asia
 Strong Yen: BOJ has to act to weaken
 Exports down, power, politics uncertain
 Resilience from job market
 Long term positives are better
 Sales tax increase
 TPP will help open up Japan
 Relocation to SE Asia out of China/Japan
9

10. GEO-POLITICAL RISKS
Key nations facing unavoidable stresses
 Syria: civil war  spillovers
 Turkey, Lebanon, Iraq
 Iran nuclear: some Israeli action likely
 Saudis facing simultaneous challenges
 Neighbors: Yemen, Bahrain
 Succession
 Internal stresses
 Egypt: long power struggle ahead
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11. CHINA: ECONOMIC CHALLENGES
Risks to growth remain high
 Activity decelerates, demand weakens
 PMIs  rapid deceleration
 But: Resilience in services, retail
 Corporate sector feeling the hit
 Kerb lending rates soaring
 Corporate cashflows weakening
 Inventory build up is huge
 Cotton, coal, steel, homes, autos, copper…
 Policy response is key
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12. INDIA: OFF THE BOTTOM?
Economy risky but may bottom out soon
 Political risks
 More reforms but risks remain
 External pressures have built up
 Oil price fall would help
 External demand, capital flows
 Some positives
 Investment hurt by business worries
 Policy easing: rates cut, Rupee has fallen
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 Supply side forces remain positive 12

13. INDONESIA: HOW RESILIENT?
Some slowing inevitable
 Not immune to global slowdown
 Exports still falling
 Commodity prices down
 Domestic economy firm
 Consumer Confidence Index rising
 Imports of machinery, appliances, autos
up
13
 Corporate risks rising 13

14. CONCLUSION
Implications for corporate governance
 Global: into a phase of greater risks
 Asia: clear hit from global weakening
 Asian companies will be hit
 In periods of stress corporate risks rise
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15. Thank you!
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