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Exhibit 44: Emerging Market GDP Growth We expect growth roughly in line with potential. % YoY {PPP Weighted) 10 4 Actual GDP Forecast Se Potential GDP | | 8 cb a | | | 3 1993 1996 1999 2002 2005 2008 2011 2014 2017 Data as of 2016. Note: ISG forecasts for 2016-17. For informational purposes only. There can be no assurance the forecasts will be achieved. Source: Investment Strategy Group, IMF. large fiscal stimulus package last August and a shift by the BOJ away from ever-higher purchases of Japanese government bonds (JGBs). Instead, the BOJ will now use a “yield-curve control” framework, wherein it sets the short rate and targets a yield of about 0% on 10-year JGBs. This novel approach should afford the government low real interest rates with which to finance its fiscal expansion, while also providing Japanese financial institutions with a sufficiently steep yield curve to remain profitable. To augment these deflation-fighting measures, the government also implemented some modest structural reforms and called for a substantial increase in the minimum wage in order to support faster income growth. Against this backdrop of supportive policies, we expect that GDP will grow by 0.75-1.5% in 2017. Our forecast is supported by three key drivers. First, the fiscal stimulus announced in August is poised to contribute 0.4 percentage point to 2017 GDP growth, and the government has indicated a willingness to do more if necessary. Second, the BOJ remains very accommodative, thereby providing easy financial conditions that should foster an uptick in business investment. While the central bank may consider a modest rate increase in late 2017, we expect it to maintain its negative interest rate policy (NIRP) for short rates and a 0% target for 10-year JGB yields in the interim. Lastly, the government is likely to push for further wage increases during the spring wage negotiations. These pro-growth policies, coupled with less slack in the economy and a boost from higher energy prices and past yen appreciation, should enable core inflation (excluding fresh food) to reach our expected range of 0.25-1.0%. While Japan may have lost its battles against deflation over the years, it has not yet lost the war. Emerging Markets: Competing Forces Emerging market economies failed to live up to expectations once again in 2016, with GDP expanding by an estimated 3.9% versus original expectations closer to 5.0%. This marked the second-slowest growth rate in 15 years; only the 2.6% expansion at the depth of the global financial crisis in 2009 was slower. Yet this disappointing headline belies the economic recovery that unfolded over the course of 2016. Consider that growth actually troughed during a challenging first quarter, with economic activity gradually improving thereafter on the back of recovering commodity prices, the Federal Reserve’s willingness to delay any further rate hikes and stable Chinese growth. These tailwinds were bolstered into the final quarter by early signs of recovery in Brazil and Russia, both of which had suffered deep recessions in 2015. We expect this momentum to persist, with GDP increasing by 4.3-4.8% (purchasing power parity [PPP] weighted) this year, roughly in line with potential (see Exhibit 44). The pickup we expect is the product of two opposing forces. On the one hand, growth should benefit from the ongoing recoveries in Brazil and Russia, and somewhat stronger activity in developed economies should provide a small tailwind to emerging market exports. On the other hand, the further moderation in Chinese growth we expect is likely to weigh on activity across emerging markets, particularly if the US imposes tariffs. Indeed, the policy agenda of the incoming US administration remains a critical unknown for emerging markets. Even if protectionist tariffs were directed only at China and Mexico—which account for 23% and 15% of US imports of manufactured goods, respectively—they would still negatively impact all emerging markets given the sensitivity of these countries to Chinese growth and fluctuations in the Chinese currency. This being the case, countries with substantial trade exposure to Outlook | Investment Strategy Group 45 HOUSE_OVERSIGHT_014578