[PPT] - COVID-19: WHAT WE CAN EXPECT MOVING FORWARD LOCKDOWNS ARE WORKING PowerPoint Presentation

SLIDE 1

COVID-19: WHAT WE CAN EXPECT MOVING FORWARD

SLIDE 2

LOCKDOWNS ARE WORKING

4/27/2020 COVID Page 2 China Korea US NY Italy Spain France Germany UK Japan 1 10 100 1,000 10,000 1 11 21 31 41 51 61 71

3D Avg. of New Cases Days since 30th cases

Regions that applied lockdown have seen new cases peaking

SLIDE 3

WHERE ARE MOST COUNTRIES ON THE TIMELINE?

4/27/2020 COVID Page 3

Countries will go through 4 stages:

Lockdown  Peak in Daily New Cases Containment (0.1%-0.2% daily growth)  Reopen

The timeline for Wuhan is as followed (number of days after lockdown)
14 days to peak
45 days to containment then partially reopen
75 days to fully reopen
We assume that countries will take 18 days to peak, 55 to contain and reopen partially

Date Lockdown Peak Containment & Partial Reopen Italy March 8 March 21 May 3 France March 14 March 31 May 9 Spain March 14 March 31 May 9 Germany March 22 March 28 April 30 UK March 24 April 11 May 20 US (last state) March 30 April 15 May 30 New York March 22 April 8 May 22

SLIDE 4

WHAT DOES REOPEN MEAN?

4/27/2020 COVID Page 4

KEY RISKS OF NCOV-19:

High asymptomatic/pre-symptomatic transmission that is extremely hard to detect

LIKELY SCENARIO: Virus will not be eradicated. Path forward will be of compromises:

Some sort of social distance after reopening (large gatherings, selected lockdown)
Mass testing & contact tracing to slow the spread (Korea style)
Interregional travel won’t be possible or fully resumed until most countries reach containment stage
Resurgences WILL happen, but be dealt much swiftly due to our experience & test capability

 Full resume of normal life will take much longer, probably until the release of a cure or vaccine

SLIDE 5

CURES & VACCINES

4/27/2020 COVID Page 5

Stage Timeline Efficacy Production Existing antiviral Human Testing Summer 2020 Mixed Mass & ready Remdesivir Phase 3 Summer 2020 High Small Novel drugs Preclinical Early 2021 High N/A Vaccine Phase 1 Early 2021 High N/A

Existing drugs are widely available but have questionable efficacy, which will only aid in the fight but

is not going to be a game-changer

Best Case: Q3 2020
Remdesivir proven effective and ramp up production to 1m courses by the end of the year
Base Case: 1H 2021
Wait for breakthrough in new drugs/vaccines, which will take us until 2021

SLIDE 6

VIETNAM’S SITUATION

4/27/2020 COVID Page 6

CASES WAVE 1 WAVE 2 TOTAL Imported 8 154 162 Local 8 98 106 TOTAL 16 252 268 Recovered 16 212 228 Active cases

40

40

CURRENT SITUATION, as of April 7th

Wave 2: 233 cases, 64% imported, 36% local
Total tested: 106,397 (top 20th globally while only in top 120th for cases)

TIPPING POINT 19/03/2020 & DIRECTIVE 15:

Social distance measures and close of non-essential businesses kick in after two local clusters and

unable to track F0 of cases  good early decision to limit spreading

For Bach Mai hospital local cluster, within 10 days, Vietnam tracked and tested 60,922 contacts
Oxford’s Index for Government Response rates Vietnam at maximum 100

WHAT WE EXPECT

Vietnam will be able to control COVID by the end of April with very few to 0 new cases daily

SLIDE 7

CONCLUSION

4/27/2020 COVID Page 7

REOPEN:

Western countries can start reopening from around end of May
Vietnam will control the disease by end of April due to timely aggressive measures

HOW:

Virus will not be completely eradicated
First few months will have some social distancing measures coupled with testing and tracing
Best case for treatment is Q3 2020 while vaccine is still long way to go
Thus, complete resume to normal life might be 2021

SLIDE 8

US ECONOMY – LESSON FROM THE PAST

SLIDE 9

3,386 2,237 2,000 2,200 2,400 2,600 2,800 3,000 3,200 3,400 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 11-Mar 25-Mar 8-Apr

S&P Index – Market reaction to policies in 2020 Virus crisis

2020 VIRUS CRISIS

05 Apr 2020 2008 Financial crisis vs. 2020 virus crisis Page 9

20-Feb: all time high - 3386 First 10% drop amid virus spread globally 1st Black Monday Fed cut rates by 50bps 2nd Black Monday – Russia and Arabia went to war on Oil + Virus worsen Black Thursday:

Trump failed to calm

down investors during his national address

ECB not cut rates

3rd Black Monday Fed went super aggressive – ALL-IN:

Cut rates to 0%
Start QE
Buy commercial

paper

Start FX swap lines
Repo and asset

classes

ALL-IN

Rally on hope virus has peaked in U.S and EU Current bottom – down 34% from peak Rally on the $2.2tn rescue package MAX PANIC

SLIDE 10

2020 SITUATION - FOR NOW

05 Apr 2020 2008 crisis Page 10

Compared to 2008, Fed actions have been very aggressive, they seems to learnt the hard lesson from 2008 (acted too late), so far they

have been able to stabilise the financial and banking system. The risk to another collapse in financial system and banking system is moderately low.

From 2008 perspective, stock market only make a bottom once they see a clear path to recovery from recession: Obama’s stimulus

package played an important role. Therefore, we think stock market only make a bottom once they see a clear path to recovery – another stimulus package could be an important factor. But we expect the stimulus package only release after the government see a clear path to recovery from the virus 2008 GREAT FINANCIAL CRISIS 2020 VIRUS CRISIS Cause: man-made, policy error Cause: Natural phenomenon (likely) Preventable? Yes. Complacent entity: Fed Preventable? Somewhat. Complacent entity: US government Fed: complacent in the early stage, very reactive during crisis, playing the fire extinguisher role most of the time Fed: reactive at first, then turn very aggressive once it realised the financial system could be in trouble (similar to 2008). Go all in to protect its stability Government: reactive most of the time, contributed to the worsening of the crisis by delaying the bank bailout bill; correct its mistake by release Obama’s stimulus package to end the crisis Government: very complacent in the early stage, then realise the trouble and turn aggressive by passing the rescue bill in within a week (learnt hard lesson too). However, still not aggressive enough in lockdown orders (due to states vs. Federal government nature of U.S) Path to recovery: Stabilised the banking system (Treasury bailout package) -> ensure credit flow (Fed QE) -> government stimulus to restart the engine (Obama’s stimulus package) ->

ut of recession

Path to recovery: ensure the stability of financial system and credit flow (Fed’s monetary policy) -> rescue bill to support Americans during the outbreak (Treasury 2.2tn rescue package) -> government see clear path to peak of the virus (unknown) -> government stimulus to restart the engine

SLIDE 11

85 95 105 115 125 135 145 155 165 T-56 T-42 T-28 T-14 T T+14 T+28 T+42 T+56 T+70 T+84 T+98

Attempt to overlay S&P in 2008 vs. S&P in 2020

2008 S&P 2020 S&P

ATTEMPT TO OVERLAY S&P INDEX IN TWO CRISES

05 Apr 2020 2008 Financial crisis vs. 2020 virus crisis Page 11

Are we heading to the 2nd bottom?

Actual stimulus package kicked in after virus situation subdued? T: set first bottom of both crisis as index = 100

Decline again as reality

f virus impact kick into

the economy? 1st bottom - stabilized bottom Relief rally fading?

SLIDE 12

ROADMAP FOR THE CURRENT CRISIS

SLIDE 13

OUR FRAMEWORK

4/27/2020 Page 13

Unemployment Low Economic Activities Credit Risk

5 High-Frequency Indicators

 Jobless Claims  FED Weekly Economic Index  High-Yield Spread  MBS Spread  Consumer ABS Spread Disease - lockdown

SLIDE 14

UNEMPLOYMENT: RECORD HIGH

4/27/2020 Page 14

650,000 5,245,000

SLIDE 15

UNEMPLOYMENT: JOBLESS CLAIMS

4/27/2020 Page 15 03/14/2020, 282,000 03/21/2020, 3,307,000 03/28/2020, 6,648,000

Claims

Hotels & Tourisms, 2,095 Transportation, 1,420 Entertainment, 2,493

Restaurants & Bars, 12,235 Retail ex essentials, 12,575 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Employment (thousands)

20% of workers at high risk Total: 30.8m, 20% of employees

Lockdown Partial Reopen Close to Fully Reopen Apr-1H Apr-2H May-1H May-2H Jun Jul Aug Sep Oct Nov Dec Claims

At least 20% of workers are directly impacted by lockdown
We assume that claims will stay elevated for 3 weeks in April and peak around ~7m
Claims front-loaded due to 1) timing of closure, 2) high unemployment benefits

SLIDE 16

ECONOMIC ACTIVITIES : WEI

4/27/2020 Page 16

SLIDE 17

ECONOMIC ACTIVITY: WEI

4/27/2020 Page 17

Economists forecast 20 – 25% decline in GDP in Q2, consistent with unemployment numbers
At current reading of -6%, we expect WEI to continue decline and trough near -20% in May
The path afterwards will be a slow recovery, consistent to our COVID base case, which most cities

will require some sorts of mild social distancing Lockdown Partial Reopen Close To Fully Reopen Apr-1H Apr-2H May-1H May-2H Jun Jul Aug Sep Oct Nov Dec WEI

4/4/2020, -6.56

8
6
4
2

2 4 6

02/20 02/20 02/20 02/20 02/20 03/20 03/20 03/20 03/20 04/20

Weekly Economic Index

Hotels & Tourisms, 118 Transportation, 166 Entertainment, 336 Restaurants & Bars, 840 Retail ex essentials, 2711 Consumer Spending

Consumer Spending Total: 20% of GDP

SLIDE 18

CREDIT RISK: BANKS IN MUCH BETTER SHAPE

4/27/2020 Page 18

Critical control measures introduced post 2008: Dodd Frank Act and Basel III standards
Banks are now more capitalized against turn of asset quality (much higher CAR)

40 60 80 100 120 140 160 180 4 5 6 7 8 9 10 11 12 13

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Banks are well-capitalized and well-reserved vs the past Tier 1 common equity/ Risk-adjusted assets (%) (RHS): Loan loss reserve/ NPL (%)

Source: Federal Reserve Bank of New York Research and Statistics Group

SLIDE 19

CREDIT RISK: CORPORATE BALANCE SHEET

4/27/2020 Page 19

1.24 2.35 1.15

0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5

D/E Ratio: S&P 500 companies are much healthier

Russell 2000 S&P 500

1.97 1.59 1.17 1.28

0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3

Current Ratio: Russell 2000 have sufficient liquidity ratio, although declining

Russell 2000 S&P 500

SLIDE 20

CREDIT RISK: SME

4/27/2020 Page 20

Firms by Employees

No. of Firms

Workforce Total Payroll ($bn)

Avg. Monthly

Payroll ($bn) Less than 20 5,339,918 21,096,447 869 72 20 – 100 544,485 21,348,103 928 77 100 – 500 92,358 18,111,531 914 76 TOTAL 5,976,761 60,556,081 2,711 $226bn CARES $360bn Months of Support 1.5 month Components: TOTAL $359bn

Paycheck Protection Program ($349bn): 2-year loan at 1.00% to cover payroll & opex

Analysis:

CARES only enough to cover 1 – 1.5-month worth of expenses.
Hence, some risks to SME and weaker corporations
Congress is planning to add more money into this program, which we will factor in after confirmation

SLIDE 21

CREDIT RISK: HIGH-YIELD (HY) SPREAD

4/27/2020 Page 21

Lockdown Partial Reopen Near To Full Reopen Apr 1H Apr 2H May 1H May 2H June July Aug Sep Oct Nov Dec HY

RISK: less than 2018 but still some as CARES might not fully support weaker companies
TREND: spike as the result, then moderate but still higher than normal period

12/16/2008, 18.04 2 4 6 8 10 12 14 16 18 20 8/06 8/07 8/08 8/09 8/10 8/11 8/12 8/13 8/14 8/15 8/16 8/17 8/18 8/19

High-Yield Spread

SLIDE 22

CREDIT RISK: HOUSEHOLD STRESS TEST

4/27/2020 Page 22

ANNUAL WAGE < $30k $30k – 50k $50 – 75k > $75 % employees 26% 36% 20% 18% RISK ASSESSMENT Layoff Risk High High Medium Low Income per month (A) $2,500 $2,500–4,200 $4,200–6,250 $6,250+ CARES ACT + Unemployment Benefits(B) $3,800 – 4,800 N/A Loss of income (A) - (B) 0% up to 10% up to 40% Workers with mortgage 20% 35% 35-50% 67%

Risk of default No Low Low Low

SLIDE 23

CREDIT RISK: MBS & CONSUMER ABS SPREADS

4/27/2020 Page 23

Lockdown Partial Reopen Near To Full Reopen Apr 1H Apr 2H May 1H May 2H June July Aug Sep Oct Nov Dec MBS ABS

1.32

5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 0.2 0.4 0.6 0.8 1 1.2 1.4 Fed Purchases MBS Spread

GFC peak: 1.8% 3.78 2.63

0.5 1 1.5 2 2.5 3 3.5 4 02/20 02/20 02/20 02/20 03/20 03/20 03/20 03/20 03/20 04/20 Auto ABS Credit Card ABS

GFC peak: 8 - 13%

RISK: less than 2008 as household incomes are well-supported
TREND: spike up as defaults pick up, then stabilize due to Fed’s support of the market

SLIDE 24

PUTTING IT ALL TOGETHER: STYLIZED TIMELINE

4/27/2020 Page 24

Lockdown Partial Reopen Near to Full Reopen Apr 1H Apr 2H May 1H May 2H June July Aug Sep Oct Nov Dec Virus (US) Lockdown Peaks Slowing Slowing Unemployment Claims Peaks Econ Activities WEI Drop Bottom in May Credit Risk HY Peaks Fed MBS Peaks Fed Consumer ABS Peaks Fed

Conclusions: Indicators will trough 2H April to May - where the market trough might be

SLIDE 25

CORPORATE EARNINGS REVISION ONGOING

4/27/2020 Page 25

S&P 500 2020 EPS forecast

15% to -30%

(*) Subject to further revision

110%
60%
10%

40% 90% 140% 190% 240% 290% 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000

08/08 11/08 02/09 05/09 08/09 11/09 02/10

Dow Jones vs. Earnings Growth

Earning Growth Dow Jones (LHS)

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

1/9/20 1/14/20 1/19/20 1/24/20 1/29/20 2/3/20 2/8/20 2/13/20 2/18/20 2/23/20 2/28/20 3/4/20 3/9/20 3/14/20 3/19/20 3/24/20 3/29/20 4/3/20 4/8/20

12 month Forward EPS Revisions Ratio (# upward/ total revisions)

Source: Refinitive I/B/E/S

Earning revision vs. Markets

SLIDE 26

1

1. What is the current situation in Vietnam? 2. What are the economic impacts? 3. Can Covid-19 break down Vietnam’s financial stability? 4. What are the Government’s likely responses? COVID-19: IMPACTS ON VIETNAM

SLIDE 27

2

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 VIET CHI INDI PHIL INDO HUN POL THAI CZ CHIL KOR RUS SAFR BRZ MEX TUR ARG

VN TACKLES COVID-19 WITH A SOLID ECONOMY

EM’S HIGHEST 2019 GDP GROWTH

%

SLIDE 28

3

CONTINUALLY RISING FDI FLOWS

2 4 6 8 10 12 14 16 18 20 22 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 $bn

CURRENT ACCOUNT IN SURPLUS

(12) (10) (8) (6) (4) (2) 2 4 6 8 10 (12) (10) (8) (6) (4) (2) 2 4 6 8 10 07 08 09 10 11 12 13 14 15 16 17 18 19E Current Account $bn (LHS) Current Account / GDP (RHS) $bn %

MACRO INDICATORS: GOOD FOOTING TO COVID19

FX RESERVES AT RECORD HIGH

10 20 30 40 50 60 70 80 1.5 1.9 2.3 2.7 3.1 3.5 3.9 4.3 Jan-10 Jan-12 Dec-13 Dec-15 Dec-17 Dec-19 Mo's of Imports (LHS) FX Reserves (RHS) $bn mo’s

ASIA’S FASTEST-GROWING EXPORTS

20
10

10 20 30 40

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019E

VIET CHIN INDIA PHIL MAL THAI INDO

%

LOW FOREIGN DEBT

FOREIGN DEBT = $112BN 2018 GDP = $245BN

Private Debt, 58% Gov't Bank Debt, 14% Gov’t ODA Debt, 28%

Sources: Bloomberg, World Bank, IMF, DC

VND STABILITY: THE ACID TEST

0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0

Feb-11 May-13 Aug-15 Nov-17 Feb-20

THAI CHIN VIET PHIL’S MALAY INDO SRI RUS BRZ TKY ARG

SLIDE 29

4

Italy Spain France Germany Iran Korea US UK China Malaysia Vietnam 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63

GREAT CONTAINMENT EFFORT BY THE GOV

Days

VIETNAM: LOWEST GROWTH RATE OF INFECTED CASE PER 100K POPULATION

Infected case

SLIDE 30

5

ONLY 153 CASES IN VIETNAM AS OF APRIL 8

8

13 Jan 30 Jan 12 Mar 16 Mar 28 Feb

WAVE 1

TOTAL CASES 16 31 Jan 14-day quarantine for inbounds from South Korea, Italy, Iran Suspension of visa-free travel for South Koreans Flights to/from South Korea diverted to second-tier airports Suspension of visa waiver program for eight EU countries First case arrival in VN Suspension of entry for Schengen and UK travelers, and of visa-on-arrival for all foreign nationals Shut-down of entertainment venues in Hanoi, HCMC and tourist hotspots Mask required in crowded public places Announcement of first case (imported)

8

8 imported 8 local 7,000 quarantined Active Cases:: 0

WAVE 2 TOTAL CASES 233

150 imported 83 local >50,000 quarantined at Government facility Active Cases: 127 Imported cases Local cases

83 150

Schools closed Suspension of commercial flights to/from China; 14-day quarantine >10,000 Vietnamese coming back. HCM: One week shut-down bars, restaurants and public activities 24 Mar

ÌNFORMATION SYSTEM WORKS WELL- ABLE TO TRACE BACK ALL INFECTED CASES AND QUARANTINE F1, F2, F3 AS OF 26 MAR

NO DEATH YET

SLIDE 31

6

KEY: SERIOUS ATTITUDE BY VIETNAMESE

LOVE YOUR COUNTRY – STAY HOME PLEASE AT THE BANK

SLIDE 32

7

GDP IMPACT: HARDEST HIT SERVICES SEC (42% GDP)

HOTEL OCCUPANCY

1 2 3 4 5 6 7 8 9 10 11 12 13 2M18 2M19 2M20 71.2 9.5 10 20 30 40 50 60 70 80 Pre-Corona 2018-19 23-Mar 0.00 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20

REAL GROWTH IN RETAIL SALES TOURIST ARRIVALS IN VIETNAM

Record Low Heading for Zero? Some Buffer from Rural Areas

5

5 10 15 20 2017 2018 2019 2020 %

PASSENGER TRANSPORATION GROWTH IN FEB

m % %

SLIDE 33

8

BUT V-SHAPE RECOVERY: IS IT POSSIBLE ?

60
40
20

20 40 60 80 2010 2011 2012 2013 2014 2015 2016 2017 %

GROWTH IN CHINESE TOURIST ARRIVAL AFTER VN-CHINA CONFLICT IN 2014

SURPRISE EVERYONE Burn Chinese Factories, Block Chinese tourist

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9

16.0% 12.5%

5.0%

2018 2019 2020 48 49 50 51 52 53 54 55 56 57

Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20

94% 70% 65% 80% 30% 35% 20% Mobile Phone Parts Machinery Computers and Electronic Parts Garments

GDP IMPACT: MANUFACTURING SECTOR – NOT TOO SEVERE

POWER CONSUMPTION ONE MONTH AFTER TET INPUTS IMPORTED FROM CHINA, KOREA, JAPAN PMI

10.8% 11.5% 5.9% Mar 18 Mar 19 Mar 20

POWER USAGE 1-15 MAR: PICKING UP AGAIN FACTORIES IN VIETNAM ARE OPENED AND NOT FACING LABOR SHORTAGE

SLIDE 35

10

BUT SHUTDOWN IN USA AND EU WILL IMPACT

USA, 23.0% EU, 15.8% CHINA, 15.8% JAPAN, 7.7% KOREA, 7.5% OTHERS, 30.1%

20-30% of Orders Canceled Less than 10% so far 70% Cut & Trim 30% ODM

EXPORT MARKET – DOMINATED BY USA, EU AND CHINA SURVEY OF TEXTILE COMPAINES – ACCOUNT 25% EXPORT VALUE TO THE US YTD: IMPORT + 1.8% YOY , EXPORT + 4.5% HALF MONTH OF APRIL: IMPORT – 20% MOM, EXPORT – 36% MOM

SLIDE 36

11

VIETNAM FINANCIAL STABILITY: GOOD FOR NOW

BUT INTERBANK MARKET STABLE SINCE EARLY FEB BIGGEST EQUITY OUTFLOW EVER – 3x 2008

500
400
300
200
100

2008 2011 2016 2020 1.9 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3 3.1 3.2 3.3

3-Feb 8-Feb 13-Feb 18-Feb 23-Feb 28-Feb 4-Mar 9-Mar 14-Mar 19-Mar

AND CURRENCY AMONG BEST AGAINST USD YTD

20.71
10.63
9.46
8.37
7.24
6.85
4.09
1.99
1.48
1.44
0.98
0.32
0.03

0.00 AUD KRW IDR THB SGD MYR INR CNH CNY TWD PHP VND JPY HKD %

% Overnight Rate Moving Ave ON

SLIDE 37

12

BIG COMPANIES: STRONG CASHFLOW

GROSS DEBT/EQUITY RATIO CASHFLOW

5

5 10 15 20 25 30 35 40 45 50

Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015 Q4 2015 Q3 2016 Q2 2017 Q1 2018 Q4 2018 Q3 2019

50% 55% 60% 65% 70% 75% 80% 85%

Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015 Q4 2015 Q3 2016 Q2 2017 Q1 2018 Q4 2018 Q3 2019 VND trn

Corporate Vietnam was in good shape heading into COVID-19 crisis
For top100 listed, gross DERs are lower than ever, cashflows higher than ever
Buybacks are being offered, pumping local sentiment, but foreigners keep selling

SLIDE 38

13

74% 68% 67%

2017 2018 2019

0.7 0.7 0.8

2017 2018 2019

x

SME: MORE CHALLENGING BUT NOT IMMEDIATE RISK

GROSS DEBT / EQUITY RATIOS CASH / PAYABLES

1,500 companies with market cap of less than $40m are a good proxy for SMEs
Gross DERs are lower than ever, but only 9 months of expenses in cash is on hand

CASH / INTEREST EXPENSES

5.2 5.2 5.7

2017 2018 2019

888 1,350 1,795

2017 2018 2019 $m

x TOTAL OPERATING CASH FLOW

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14

MONETARY POLICY RESP: $11BN PACKAGE

Interest Rates

The SBV has cut the policy rate by

50 bps to 3.5%

It has also cut the deposit-rate cap

by 25 bps

This will create the basis for a cut in

the unduly high lending rate Loan Packages

The SBV will allow extensive loan

restructuring for any businesses hit by COVID-19 Total Package

Approximately $11bn

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% Feb-15 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 Lending Rates 5y- Gov Bond Yield

...PAVES THE WAY FOR A LOWER LENDING RATE

3.0% 3.3% 3.5% 3.8% 4.0% 4.3% 4.5% 4.8% 5.0% 5.3% Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

50 BPS CUT IN POLICY RATE TO 3.5%...

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15

FISCAL POLICY RESP: TIME FOR GOV TO GEAR UP

Disaster Relief Package

$2.7bn (1% GDP) package helicopter money to

unemployment – at NA now for approval

$7.8bn (2.9% GDP) - tax relief, land rent. Not yet

at NA for approval Infrastructure in Focus

Infrastructure- the key theme of the fiscal stimulus,

with spending stalled by anti-corruption probes since 2017

$13bn has piled up in idle Government deposits at

State banks. We forecast $30bn to be authorized for infrastructure in 2020-23 Conditions

Fiscal deficit (3.4%), public debt is 55% bond

yields are 1-2% – so the Gov’t has ample scope to gear up its balance sheet.

6.8 3.0 3.2 4.4 5.3 5.9 13.7 14.1 13.1

1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 2011 2012 2013 2014 2015 2016 2017 2018 1H 2019

Funds Pile up as Spending Stalls STATE BUDGET MONEY AT SOCBs

1H19 $bn

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16

GDP GROWTH FORECAST: 4.9% - BASE CASE

GDP GROWTH SCENARIOS, 2020 Sector 2019 GDP 2020 GDP Growth Cases 2008A Growth Share Growth Worst1 Base2 Best3 Agriculture 13.9% 2.0% 1.1% 1.6% 2.1% 1.8% Industry & Const’n 34.4% 8.9% 6.3% 7.4% 8.0% 5.5% Services 41.6% 7.4%

0.3%

3.6% 4.1% 6.6% Other 10.1% 6.5% 6.0% 6.3% 6.5% 4.8% Total 100.0% 7.0% 2.8% 4.9% 5.4% 5.3% GDP SCENARIO ANALYIS BEST CASE: +5.4% COVID-19 contained by May / normal business operations resumed by late Jun BASE CASE: +4.9% Containment by Jun / normal business operations by Jul Even so, GDP of +4.9% would trail +5.3% recorded in 2008 during the depths of the GFC WORST CASE: +2.8% Containment by Jul / normal business operations by Aug A mere one-month delay would cut GDP growth by almost half – longer delays would be serious

SLIDE 42