Florian Fichtl, Country Manager

World BankOctober 19, 2009

Recovery underway

Middle-East & North AfricaEast Asia & Pacific

South Asia

Europe & Central AsiaEurope & Central Asia

Industry has stopped shrinking

Recovery underwayInterest rates are lowerEmerging-market bond spreads have fallen but remain higher than pre-crisis levels

Source: World Bank, DEC Prospects Group

Syndicated bank loans by borrower type (2009 q3 as of Aug. 25)Syndicated bank loans by borrower type (2009 q3 as of Aug. 25)

…but private sector funding depressed

44

NMS affected severely by the crisis

Source: Eurostat

Tough times ahead for governmentsRapidly falling revenuesRising social expenditures and pension debt

Source: IMF World Economic Outlook

Tough times for households and businessesUnemployment will recover slowlyDifficulties in repaying bank creditNumber of vulnerable household increaseRising insolvencies Difficult access to credit

Tough times for banksCan no longer rely on large capital flows from abroadNon-performing loans are risingProfits declineDomestic credit (percentage change, year-on-year)

The way aheadReturn to growth might take longer in the region than in

the rest of the EUThis means smaller budgets for governments—need to

restructure spending to support the vulnerable and growth enhancing activities

Continued attention to financial sector stability—lower access to credit and rising NPLs

Structural transformation of economy will depend on further improvements in product and labor markets.