11.20.2013, report, selected macroeconomic indicators, international monetary fund

Mongolia

Selected Macroeconomic Indicators November 20, 2013

For further information, please contact: [email protected]

mailto:[email protected]

2

2005 2006 2007 2008 2009 2010 2011 2012 2012 2013

Q1 Q2 Q3 Oct.

Total US$-value 1,065 1,543 1,947 2,534 1,885 2,909 4,817 4,385 809 1,215 1,074 382 3,665 3,480

Mining 786 1,164 1,536 2,129 1,560 2,530 4,414 4,032 750 1,019 958 358 3,374 3,085

Copper 326 635 812 836 502 771 964 839 209 195 275 70 696 749

Gold 331 270 235 600 308 178 113 122 43 93 110 50 86 296

Coal 116 185 306 882 2,273 1,902 209 333 241 97 1,627 881

Iron Ore 16 92 87 254 442 533 126 225 127 69 436 547

Crude oil 53 102 116 155 252 336 94 109 147 47 272 396

Zinc 176 155 122 134 143 131 43 32 14 13 103 102

Molybdenium 75 82 50 52 46 38 9 7 7 2 32 25

Fluor spar 45 59 48 69 95 103 15 21 28 7 85 71

Other mining 129 259 8 19 20 36 86 29 2 5 8 4 36 18

Non-mining 279 379 411 405 325 378 403 352 60 195 116 25 291 395

Textiles 263 227 192 216 241 234 13 161 75 10 216 260

Animals, animal products 27 32 46 69 40 24 5 5 3 1 17 14

Hides and skins 42 41 29 33 51 31 14 5 7 2 22 28

Other 80 106 58 60 71 64 27 25 31 11 36 93

Export volumes

Copper 608 583 587 569 576 575 140 143 186 51 479 521

Gold (tons) 11.6 22.1 10.9 5.1 2.7 2.8 1.0 2.2 2.8 1.2 2.0 7.2

Coal 3,269 4,169 7,113 16,726 21,106 20,916 3,445 4,039 3,897 2,062 16,547 13,443

Iron Ore 240 1,013 1,598 3,564 5,802 6,416 1,122 2,076 1,492 816 5,312 5,505

Crude oil ('000s of barrels) 812 1,059 1,939 2,071 2,554 3,568 982 1,156 1,396 463 2,835 3,998

Zinc 133 138 151 120 121 141 42 35 21 14 111 112

Molybdenium 3.2 4.1 6.7 4.8 4.2 4.3 1.1 1 1 0.3 4 3

Fluor spar 360 349 314 406 407 429 64 78 112 29.3 360 284

Export volumes

Copper -4 1 -3 1 0 0 -2 28 7 9

Gold 91 -51 -53 -47 4 100 340 367 200 260

Coal 28 71 135 26 -1 1 -41 -2 -8 -19

Iron Ore 321 58 123 63 11 -24 22 3 19 4

Crude oil 30 83 7 23 40 31 48 54 17 41

Zinc 4 10 -21 1 17 34 36 -42 -21 1

Molybdenium 28 63 -28 -13 2 0 0 -9 -25 -6

Fluor spar -3 -10 29 0 5 -28 -33 -1 -31 -21

Implied prices

Copper 7 -40 58 23 -13 6 -11 5 -6 -1

Gold 34 4 24 20 4 3 -15 -6 12 -4

Coal 25 -3 22 104 -16 -42 -22 -28 -46 -33

Iron Ore 33 -40 31 7 9 54 33 -9 7 21

Crude oil 46 -38 25 32 -5 -5 -2 12 11 3

Zinc -15 -28 38 6 -21 6 -7 -22 -7 -3

Molybdenium -15 -63 44 2 -20 -15 -20 -20 -7 -17

Fluor spar 36 -10 10 38 2 10 15 -1 -8 6

Mining export price 12 -23 36 49 -11 -10 -11 -11 -21 -14

Mining export volume 20 1 21 14 4 3 -12 20 6 3

Source: National Statistics Office Mongolia; and IMF staff calculations.

(weighted average annual change, in percent)

(in thousands of tons, unless otherwise indicated)

(annual change, in percent)

2013

Table 1. Mongolia: Exports

First 10 months

(annual change, in percent)

(in millions of U.S. dollars)

3

Figure 1. Mongolia: Real Sector Developments

The economy expanded by 11½ percent during the first nine months of 2013 despite slowing

exports and FDI inflows. The start of OT’s open-pit mining is boosting industrial production.

Mongolia’s growth has been impressive.... …contributing to a decline in poverty.

The economy expanded by 11.9 percent (y/y) in the third

quarter of 2013, led by the mining sector and non-mining

industry.

Industrial output rose 33 percent during August-October

2013 (y/y), owing to the start of OT production. Non-

mineral industrial output expanded by 18 percent (y/y).

International copper prices are down almost 8 percent so

far this year.

Coal export volumes are down 19 percent so far this year.

-5

0

5

10

15

20

-5

0

5

10

15

20

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

China

Mongolia

Sources: Mongolian authorities; and IMF staff estimates.

Real GDP growth rate: China vs. Mongolia(Year-on-year percent change)

0

5

10

15

20

25

30

35

40

45

50

National Urban Rural

2010 2011 2012

Mongolia: Poverty Headcount (In percent)

Source: Mongolian authorities.

-5

0

5

10

15

20

25

-5

0

5

10

15

20

25

2008Q

1

2008Q

2

2008Q

3

2008Q

4

2009Q

1

2009Q

2

2009Q

3

2009Q

4

2010Q

1

2010Q

2

2010Q

3

2010Q

4

2011Q

1

2011Q

2

2011Q

3

2011Q

4

2012Q

1

2012Q

2

2012Q

3

2012Q

4

2013Q

1

2013Q

2

2013Q

3

Net taxes Services

Mining industry Non-mining industry

Agriculture GDP at market prices (y/y growth)


Real GDP Growth(Contribution and year-on-year percentage change, 2008Q1-2013Q3)

-30

-20

-10

0

10

20

30

40

50

-30

-20

-10

0

10

20

30

40

50

Mar-

08

Jun

-08

Sep

-08

Dec-

08

Mar-

09

Jun

-09

Sep

-09

Dec-

09

Mar-

10

Jun

-10

Sep

-10

Dec-

10

Mar-

11

Jun

-11

Sep

-11

Dec-

11

Mar-

12

Jun

-12

Sep

-12

Dec-

12

Mar-

13

Jun

-13

Sep

-13

Gross Industrial Output

Non-Mineral Industrial Output

Mineral Industrial Output

Industrial Production (12-month percentage change in 3mma , March 2008-October 2013)

Sources: Mongolian authorities.

0

2,000

4,000

6,000

8,000

10,000

0

2,000

4,000

6,000

8,000

10,000

Jan

-08

May-0

8

Sep

-08

Jan

-09

May-0

9

Sep

-09

Jan

-10

May-1

0

Sep

-10

Jan

-11

May-1

1

Sep

-11

Jan

-12

May-1

2

Sep

-12

Jan

-13

May-1

3

Sep

-13

Spot Rate (London Metal Exchange)

Budget price (from 2011: FSL-based structural price 1/)

Price in amended budget

International copper price(U.S. dollars per metric ton, Jan. 1, 2008-Nov. 20, 2013)

Sources: Bloomberg LP; Mongolian authorities; and IMF staff estimates.1/ The structural price is the average of the past 12 years and projections for the current and subsequent 3 years.

Structuralprices as per FSL 1/

-60

-40

-20

0

20

40

60

80

100

120

-60

-40

-20

0

20

40

60

80

100

120

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Oct

-13

volume growth (y/y, 3mma)

volume growth (y/y, 12mma)


Coal Export Volume(Change, in percent, January 2011-October 2013)

4

Figure 2. Mongolia: Overview of Macroeconomic Developments

Expansionary fiscal policy in 2012 supported growth but also put pressure on inflation

and the current account. The successful international bond issuance boosted reserves. Strong demand growth in recent years may have

outstripped the growth of Mongolia’s production capacity….

…contributing to double-digit inflation in 2012. Inflation in

Ulaanbaatar was 9.5 percent in October (y/y).

Expansionary fiscal policy was the main driver of the

acceleration of inflation in 2012.

It also kept the current account significantly in deficit even

as imports for the FDI-financed OT mine wound down.

The real effective exchange rate appreciated through

June. In recent months there has been a correction.

Chinggis bond proceeds raised reserves in late-2012.

Gross reserves amounted to US$2.4bn in October.

-18-16-14-12-10-8-6-4-2024681012141618

-6,000

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Mineral Output Gap (in percent of mineral GDP, RHS)

Non-mineral Output Gap (in percent of Non-mineral GDP, RHS)

GDP (in bil Tog, LHS)

Potential GDP (in bil Tog, LHS)

Output gap (in percent of GDP, RHS)


Output Gap Estimates(based on HP filter)

-10

0

10

20

30

40

-10

0

10

20

30

40

Dec-

07

Mar-

08

Jun

-08

Sep

-08

Dec-

08

Mar-

09

Jun

-09

Sep

-09

Dec-

09

Mar-

10

Jun

-10

Sep

-10

Dec-

10

Mar-

11

Jun

-11

Sep

-11

Dec-

11

Mar-

12

Jun

-12

Sep

-12

Dec-

12

Mar-

13

Jun

-13

Sep

-13

Non-food items (contribution to headline CPI)

Food items (contribution to headline CPI)

Headline CPI (y/y)

Non-food CPI (y/y)

Food CPI (y/y)


Consumer Price Inflation (in percent, December 2007-October 2013)

-25

-20

-15

-10

-5

0

-25

-20

-15

-10

-5

0

2005 2006 2007 2008 2009 2010 2011 2012

Non-mineral (NM) on-budget balance

Larger NM deficit due to DBM spending


Non-mineral fiscal balance(in percent of non-mineral GDP)

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

-4,000

-3,500

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Transfers, net

Income, net

Goods and services, net

Current account

Current account (RHS, in percent of GDP)

Current Account (2003-2012)


60

70

80

90

100

110

120

130

140

150

60

70

80

90

100

110

120

130

140

150

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

REER NEER


Exchange rates of the togrog(Index, 2005=100, Jan. 2005-Oct. 2013; an increase is an appreciation)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jan

-09

Ap

r-09

Jul-

09

Oct-

09

Jan

-10

Ap

r-10

Jul-

10

Oct-

10

Jan

-11

Ap

r-11

Jul-

11

Oct-

11

Jan

-12

Ap

r-12

Jul-

12

Oct-

12

Jan

-13

Ap

r-13

Jul-

13

Oct-

13


Gross international reserves(In millions of U.S. dollars, January 2009-October 2013)

5

Figure 3. Mongolia: Fiscal Developments

Expansionary fiscal policy pushed the deficit (including operations of the Development Bank of

Mongolia (DBM)) to 10.9 percent of GDP in 2012. Including DBM spending, the deficit reached 10.9 percent of

GDP in 2012.

The 2012 non-mining deficit topped the 2008 record.

Spending now exceeds 57 percent of non-mineral GDP. Fiscal policy has been pro-cyclical.

The Chinggis bond and DBM bond raised public debt by

US$2.1bn.

During the first 10 months of 2013, the budget has run a

small deficit (MNT 144bn or 0.9 percent of GDP). But this

excludes DBM spending.

-15

-10

-5

0

5

10

-15

-10

-5

0

5

10

2005 2006 2007 2008 2009 2010 2011 2012

On-budget overall balance

Increase in deficit owing to DBM spending


Fiscal balance(in percent of GDP)

-25

-20

-15

-10

-5

0

-25

-20

-15

-10

-5

0

2005 2006 2007 2008 2009 2010 2011 2012

Non-mineral (NM) on-budget balance

Larger NM deficit due to DBM spending


Non-mineral fiscal balance(in percent of non-mineral GDP)

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012

Non-mineral revenue

On-budget expenditure

DBM spending 1/

Sources: Mongolian authorities; and IMF staff estimates.1/ The Development Bank of Mongolia provided loans of US$ 190 million for non-revenue generating public investment projects such as roads ("social benefit projects") in 2012. The budget will need to repay these loans.

Non-Mineral Revenue and Expenditure(in percent of non-mineral GDP)

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

14

2005 2006 2007 2008 2009 2010 2011 2012

Annual change of non-min. GDP gap

Annual change of CAB (inverse)

Sources: Mongolian authorities; and IMF staff estimates.2/ The cyclically adjusted fiscal balance is the overall balance net of cyclical effects. Cyclical effects are computed using country specific elasticities of aggregage revenue and expenditure series. In this case, the elasticity assumptions are 1 for revenue and 0 for spending.

Cyclically-adjusted fiscal balance (CAB) vs. Output gap(in percent of potential non-mineral GDP)

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012

Nominal public debt NPV of public debt

Public debt(in percent of GDP)

Sources: Mongolian authorities; and IMF staff esimates.

-40

-20

0

20

40

60

80

100

-40

-20

0

20

40

60

80

100

Jan

-08

Ap

r-08

Jul-

08

Oct

-08

Jan

-09

Ap

r-09

Jul-

09

Oct

-09

Jan

-10

Ap

r-10

Jul-

10

Oct

-10

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Oct

-13

Revenue

Expenditure


Revenues and expenditure (excl. DBM, incl. carryover)

(Twelve-month percentage change in 3mma, Jan. 2008-Oct. 2013)

6

Figure 4. Mongolia: External Sector Developments

The trade deficit continues to be large. Imports continue to contract, in line with the decline in FDI. Export growth remains subdued, despite the start of operations of the OT open pit mine.

The 12-month trade deficit remains over US$2 billion.

Before the recent depreciation, the REER was appreciating

more than in copper-producing peer countries (e.g. Chile

and Peru).

Amid strong overall export performance, non-mineral

exports have underperformed.

Mongolia’s sovereign spread is now about 170 basis points

wider than the average for emerging market economies.

Stock prices of 3 mining companies operating mostly in

Mongolia (MMC, TRQ, South Gobi) have slumped.

-60

-40

-20

0

20

40

60

80

100

120

140

-60

-40

-20

0

20

40

60

80

100

120

140

Dec-

07

Mar-

08

Jun

-08

Sep

-08

Dec-

08

Mar-

09

Jun

-09

Sep

-09

Dec-

09

Mar-

10

Jun

-10

Sep

-10

Dec-

10

Mar-

11

Jun

-11

Sep

-11

Dec-

11

Mar-

12

Jun

-12

Sep

-12

Dec-

12

Mar-

13

Jun

-13

Sep

-13

Exports

Imports


Imports and Exports(Twelve-month percentage change in 3mma, Dec. 2007-Oct. 2013)

-6,000

-5,000

-4,000

-3,000

-2,000

-1,000

01,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Dec-

07

Mar-

08

Jun

-08

Sep

-08

Dec-

08

Mar-

09

Jun

-09

Sep

-09

Dec-

09

Mar-

10

Jun

-10

Sep

-10

Dec-

10

Mar-

11

Jun

-11

Sep

-11

Dec-

11

Mar-

12

Jun

-12

Sep

-12

Dec-

12

Mar-

13

Jun

-13

Sep

-13

Trade balance (RHS, inverted scale)

Exports (LHS)

Imports (LHS)

Trade Balance(12-month rolling sums, in US$m, Dec. 2007- Oct. 2013)


90

100

110

120

130

140

150

90

100

110

120

130

140

150

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Chile Lao P.D.R. Peru Mongolia

Source: IMF INS.

Real Effective Exchange Rates

(Index, 2005=100; a rise denotes a real appreciation. Jan. 08-Oct. 13)

50

100

150

200

250

300

350

400

450

50

100

150

200

250

300

350

400

450Ja

n-0

8

Ap

r-08

Jul-

08

Oct

-08

Jan

-09

Ap

r-09

Jul-

09

Oct

-09

Jan

-10

Ap

r-10

Jul-

10

Oct

-10

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Oct

-13

High-income countries

Middle and low income countries

Mongolia: Non-mineral exports

Mongolia: Total exports

Sources: Haver Analytics; CEIC Data Company; and IMF staff estimates.

Note: High-income countries include Australia, New Zealand, Japan, Korea, Singapore, and

Taiwan; Middle- and low-income countries include Indonesia, Philippines; Sri Lanka, Vietnam,

Bangladesh, and India.

Export performance relative to other Asian countries (2006Q1=100, 3mma, sa, Jan. 2008-Oct. 2013)

0

100

200

300

400

500

600

700

0

100

200

300

400

500

600

700

Jan

-12

Feb

-12

Mar-

12

Ap

r-12

May-1

2

Jun

-12

Jul-

12

Au

g-1

2

Sep

-12

Oct

-12

No

v-1

2

Dec-

12

Jan

-13

Feb

-13

Mar-

13

Ap

r-13

May-1

3

Jun

-13

Jul-

13

Au

g-1

3

Sep

-13

Oct

-13

No

v-1

3

Mongolia Philippines

Emerging mrkts. (EMEs) Sri Lanka

Vietnam Mongolia spread over EMEs

Source: Bloomberg LP.

JP Morgan EMBI Global Sovereign Spreads(in basis points, January 1, 2012-November 20, 2013)

0

20

40

60

80

100

120

140

160

0

20

40

60

80

100

120

140

160

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Mong. Mining Corp. (MMC, in HK)

Turquoise Hill (TRQ, in Toronto)

South Gobi (in HK)

Rio Tinto (London)

Sources: Bloomberg LP.; and IMF staff estimates.

Stock Prices for Mining Companies(Index, January 1, 2011=100, Jan. 1, 2008-Nov. 20, 2013)

Return since Jan.1, 2011(in percent) _ MMC (coal) -85TRQ (copper) -79South Gobi (coal) -91Rio Tinto (diverse) -24Copper price -29

7

Figure 5. Mongolia: Monetary Developments

Bank lending has picked up rapidly in recent months.

The growth of private sector credit accelerated to 53 percent

in October (y/y). Deposit growth amounted to 23 percent

(y/y).

Banks’ loan-to-deposit ratio has now risen substantially

above the average for the past 8 years.

Banks are holding substantial overall excess reserves with

the Bank of Mongolia, mostly in foreign currency.

Bank lending rates have been trending down but ticked up

in August.

In three steps, the Bank of Mongolia’s Monetary Policy

Committee lowered the policy rate 275 bps, to 10.5 percent.

New regulations to strengthen bank capitalization are

being phased in amid low reported NPLs.

-40

-20

0

20

40

60

80

100

120

140

-40

-20

0

20

40

60

80

100

120

140

Dec-

07

Mar-

08

Jun

-08

Sep

-08

Dec-

08

Mar-

09

Jun

-09

Sep

-09

Dec-

09

Mar-

10

Jun

-10

Sep

-10

Dec-

10

Mar-

11

Jun

-11

Sep

-11

Dec-

11

Mar-

12

Jun

-12

Sep

-12

Dec-

12

Mar-

13

Jun

-13

Sep

-13

Credit

Deposits


Bank Credit and Deposits(Quarter-on-quarter change, in percent (saar), Dec. 2007-Oct. 2013)

70

80

90

100

110

120

130

140

70

80

90

100

110

120

130

140

Dec-

07

Mar-

08

Jun

-08

Sep

-08

Dec-

08

Mar-

09

Jun

-09

Sep

-09

Dec-

09

Mar-

10

Jun

-10

Sep

-10

Dec-

10

Mar-

11

Jun

-11

Sep

-11

Dec-

11

Mar-

12

Jun

-12

Sep

-12

Dec-

12

Mar-

13

Jun

-13

Sep

-13

8-year average

Headline Loan-To-Deposit Ratio

Commercial Banks' Loan-To-Deposit (L/D) Ratio

(Dec. 2007-Oct. 2013)


0

5

10

15

20

25

30

35

40

0

200

400

600

800

1000

1200

Jun

-09

Dec-0

9

Jun

-10

Dec-1

0

Jun

-11

Dec-1

1

Jun

-12

Dec-1

2

Jun

-13

Excess reserves on togrog deposits (in MNT bn, LHS)

Excess reserves on forex deposits (in MNT bn, LHS)

Required reserve rate (in percent, RHS)

Excess reserves (in percent of reserve money, RHS)


Excess Reserves

(June 2009-October 15, 2013)

0

5

10

15

20

25

0

5

10

15

20

25

Jan

-09

Ap

r-09

Jul-

09

Oct

-09

Jan

-10

Ap

r-10

Jul-

10

Oct

-10

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Headline CPI

Lending rate (in togrog, 1 year)

Lending rate (in US$, 1 year)

Deposit rate (in togrog, average 1 year)

Deposit rate (in US$, average 1 year)

Spread on togrog lending and deposit rates

Commercial banks' interest rates(Percent per annum, end-of-period, Jan. 2009-Aug. 2013)


0

5

10

15

20

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

-09

Ap

r-09

Jul-

09

Oct

-09

Jan

-10

Ap

r-10

Jul-

10

Oct

-10

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Oct

-13

CBBs outstanding (in billions of togrogs, LHS)

7-day CBB rate (in percent, RHS)

84-day CBB rate (in percent, RHS)


Central Bank Bills (CBBs)(January 1, 2009-Nov. 19, 2013)

0

5

10

15

20

0

5

10

15

20

25

Jan

-09

Ap

r-09

Jul-

09

Oct

-09

Jan

-10

Ap

r-10

Jul-

10

Oct

-10

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Nonperforming loans to total loans

Bank capital to risk-weighted assets

Bank Capitalization and Asset Quality(In percent, January 2009-August 2013)


11.20.2013, report, selected macroeconomic indicators, international monetary fund

Business