Mongolia Monthly Economic Update: October,2009
Dec 4, 2009 Mineral prices held up well since the last Monthly Update. And economic growth in China-Mongolia’s main export destination continues to be strong, fueled by a massive fiscal andmonetary stimulus package. In Mongolia, however, depressed economic conditions made the trade deficit narrow further, as imports continue to fall faster than exports (on a 12-month rolling basis). Industrial production continues to contract, particularly in the manufacturing sector, with Mongolia facing a sharp GDP growth slow down for 2009 as a whole.
October, 2009 - Only coal exports are up on a year-on-year basis, on the back of extremely strong demand in China which imported record quantities in September. With the Chinese economy growing strongly, the expectation is that the fall in overall exports to China has now bottomed out and will pick up going forward. In addition, the decline in the imports of machinery and equipment seems to have turned the corner.
Mongolia has now benefited from a stable exchange rate since April of this year, due to strong policy actions taken under the IMF program and favorable copper prices. This has also allowed the BoM to accumulate international reserves. Real interest rates are now, however, very high, because the economy is experiencing deflation with prices falling by 1.9 percent (year-on-year) in September, while nominal interest rates on both savings and loans have not come down significantly.
