2014年-世界发展银行全球_Mongolia_Economic_Update_December_2014_55页_3mb

Mongolia Economic Update Summary (December 2014)

Core Content

This document provides an analysis of Mongolia's economic performance and policy challenges in 2014, highlighting the need for structural reforms and tighter macroeconomic policies to address growing economic and financial imbalances.

Main Points

Economic Growth and Sectoral Performance

• Economic growth slowed in 2014, with real GDP growth at 7% in the first nine months, down from 12.8% in 2013.
• Mining sector remained strong, growing by 26% in the first nine months, driven by increased copper and petroleum production, especially from the Oyu Tolgoi mine.
• Non-mining sector growth declined sharply, from 12.1% in 2013 to 2.5% in 2014, due to weakening construction, wholesale, and retail industries.
• Investment dropped significantly, from 38% of GDP in 2010-2012 to 35% in 2014, with FDI falling by 52% in 2013 and 58% in the first nine months of 2014.
• Final consumption remained relatively strong, contributing to 74% of total GDP in the first nine months of 2014.

Inflation and Monetary Conditions

• Inflation remained high, with headline inflation at 12.1% in October 2014, and core inflation at 14.1%, the highest since 2010.
• Inflation moderated slightly in late 2014 due to tighter monetary policy and slower currency depreciation.
• Monetary policy was gradually tightened, with the central bank raising the policy rate by 150 basis points to 12% in July 2014.
• Money supply growth declined, from 42.2% in April 2014 to 14.4% in October, reflecting the impact of monetary tightening.

Unemployment and Labor Market

• Unemployment rate declined to 6.4% in Q3 2014, with declines observed across all genders.
• Self-employment increased since late 2013, indicating a shift in the labor market away from agriculture.
• Labor market adjustments are ongoing, with continued challenges in non-mining sectors.

Fiscal and Debt Developments

• Fiscal policy became tighter, with off-budget expenditures reduced to MNT 1-1.2 trillion in 2014 from MNT 1.5 trillion in 2013.
• Public debt rose to over 60% of GDP in 2014, driven by commercial external debt and the Bank of Mongolia's (BoM) foreign liabilities.
• Fiscal deficit remained high at 7% of GDP, due to off-budget spending and revenue shortfalls.
• Debt servicing costs increased, constraining fiscal space and contributing to the budget deficit.

External and Financial Vulnerabilities

• Current account deficit narrowed to 11% of GDP in 2014 from 30% in the previous three years, due to stronger copper exports and import compression.
• Balance of payments pressure remains high, with international reserves falling below three months' import cover.
• External vulnerabilities are rising, with large public debt repayments scheduled for 2017-2018, equivalent to 9% of 2014 GDP.
• Banking sector risks increased, with non-performing loans (NPLs) and past-due loans rising by 48% and 166% respectively over the past year.
• Loan to deposit ratio reached 132%, indicating liquidity constraints and overreliance on central bank credit.

Policy Recommendations

• Tighter macroeconomic policies are needed to address external vulnerabilities and stabilize the economy.
• Consolidate off-budget spending into the regular budget and implement a realistic fiscal consolidation plan.
• Strengthen prudential regulation on banks, including applying a new general provisioning ratio to all loans and lifting regulatory forbearance on policy loans.
• Revive foreign investment to reduce the reliance on external debt and support economic growth.
• Reform the pension system to ensure long-term sustainability, including a multi-pillar design and improved debt management.

Key Economic Indicators and Policy Measures

Budget and Fiscal Policy

• The 2015 budget showed a consolidated deficit of 7% of GDP, with off-budget expenditures planned to be reduced.
• Tax revenue is heavily dependent on mining, with mineral tax revenues contributing significantly to the budget.
• Public expenditure is dominated by social services and public infrastructure.

Banking Sector

• Housing mortgage lending program accounted for over 60% of policy credit, contributing to rising NPLs and past-due loans.
• Loan quality deteriorated, especially in construction and wholesale/retail sectors, with NPL ratios increasing continuously.

External Position

• International reserves declined, and the ratio of short-term external debt to reserves is rising.
• Exchange rate remained under pressure due to balance of payments (BoP) issues.
• Capital inflows continued to decline, exacerbating BoP pressures and the external financing gap.

Challenges and Outlook

• Economic imbalances persist, with a growing gap between mining and non-mining growth.
• External vulnerabilities are increasing, with the risk of a potential fiscal and balance of payments crisis.
• Inflationary pressures remain, with the central bank struggling to bring inflation down to its 7% target.
• Monetary and fiscal tightening are necessary to stabilize the economy and reduce risks, but may have negative effects on growth.
• The new government has shown a strong resolve to address these challenges, emphasizing fiscal and economic stability, improved debt management, and better integration of the mining sector.

Conclusion

Mongolia's economy is transitioning from a period of rapid growth to a more sustainable but cautious phase. While the mining sector remains a key driver of growth, the non-mining sector is struggling with weak investment and policy stimulus effects. The government's focus on stability over growth, combined with measures to tighten fiscal and monetary policies, is essential to address the underlying imbalances and vulnerabilities. However, the path to recovery remains challenging, with external debt, inflation, and balance of payments pressures continuing to pose significant risks.