MONTHLY MACROECONOMIC OVERVIEW

April 2014

MAIN INDICATORS: GDP, STATE BUDGET, FOREIGN TRADE, EXCHANGE RATE, INFLATION

Source: NSO, BoM

The economic growth is 7.4% at constant prices in the

first quarter 2014 GDP reached MNT 3.4 trillion or USD

1,9 billion at current prices and MNT 1.15 trillion or USD

3.5 billion at prices of 2005 in the first quarter 2014, which

is up by 18.3% at current prices and 7.4% at prices of 2005

compared to the same period last year. The GDP growth

was driven by increases in agriculture sector that rose by

18.4%, construction sector by 15.8%, respectively.

The accumulative budget for the central and local

governments is in deficit of MNT 105 billion. In the first

four months of 2014 the total state budget revenue and

expenditure amounts to MNT 1675.8 billion and MNT

1781.5 billion respectively. The deficit has exacerbated

from 136 billion surplus for the same period last year, since

revenue increased only by 5.4%, whereas expenditure by

22.6%. The increase in expenditure was caused mainly by

expenditure on goods and services that rose by 16%,

threshold rate by 13%, interest payments by 3 times,

subsidies and transfers by 23%

The foreign trade deficit has reached USD 93.8 million

for the first four months of 2014 The total turnover of

foreign trade reached USD 2958.6 million, showing

increase of 0.18% compared to the same period last year.

Exports are higher by 18% reaching USD 1432.4 million

and imports falling 12.3% accounting to USD 1526.2

million. However, compared to the previous month the

export and the import level increased by 13% and 38%

respectively. The coal export reached USD 272.6 million in

value, so it represents a 20% decrease from the same period

last year. Export value of copper concentrate showed an

increase of 92% from the same period last year amounting

to USD 530.2 million.

The Mongolian Tugrik continued to depreciate against

the USD. The monthly average exchange rate depreciated

by 0.7% to 1,784.11 MNT against the USD, while the yearly

average exchange by 25.9% over the past year. In January

the total amount of foreign currency reserves reached USD

2,446 million, up by 8.8% compared to the previous month.

Compared to the same period last year, foreign currency

reserves are now down 40.1%.

The yearly inflation rate rose to 12.3% in April

Compared to March 2013 inflation rate increased by 1.9

percentage points (ppts) and reached 12.3% of the 1%

inflation for the month and 4.6% year to date inflation, price

rise of food and non-alcoholic beverages as well as of

clothing, footwear and clothing contributed at most. The

12.3% yearly inflation rate was caused by increases in the

prices of educational services , clothing, footwear and

clothing as well as household furniture.

7.1

14.3

11.9 12.3

7.4

0

6

12

18

0123456

4Q

1

2

1Q

1

3

2Q

1

3

3Q

1

3

4Q

1

3

Economic growth GDP, at current

prices (left)

GDP growth,

year-on-year, at

constant prices

(right)

(%(MNT trillion)

1.59 1.45

0.14

1.68 1.78

(0.11)

-1

0

1

2

Revenue Expenditure Balance

General Government budget

04'13

04'14

(MNT trillion, in the first 4 months)

1.21

1.74

(0.53)

1.43 1.53

(0.09)

-1

0

1

2

Export Import Balance

Foreign trade

04'13

04'14

1.1

4.8

10.4

1.0 4.6

12.3

048

1216

Monthly YTD YOY

Inflation

04'13

04'14

(1$=...₮, monthly average)

(Consumer price index growth, nationwide, April )

(USD billion, in the first 4 months)

1,784.11

1,200

1,300

1,400

1,500

1,600

1,700

1,800

03

'13

04

'13

05

'13

06

'13

07

'13

08

'13

09

'13

10

'13

11

'13

12

'13

01

'14

02

'14

03

'14

Exchange rate - to depreciate

- to appreciate

Economic Policy and Competitiveness Research Center

www.ecrc.mn

MONTHLY MACROECONOMIC OVERVIEW

April 2014

FINANCIAL SECTOR: MONEY SUPPLY, DEPOSITS, LOANS

Source: NSO, BoM

Summary

As of the first quarter, although the growth of economics could not overtake the year with higher growth (for the first quarter of 2012,

domestic gross products increased by 15.9%), it increased by 0.3 unit that is 7.4%. Although there have been adverse effects such as

sudden deterioration of currency rate, high inflation etc, in the economics, increase of agriculture, industry and construction influenced the

economics to be still energetic. Pursuant to estimation by International Organizations and the Government, the economic growth will be

9.5%-12.9% that is in double digital. In addition, the World Bank predicted that the economic growth of 2014 of our country would reach

11.4% by increasing from 10.3% that was deemed it last October. According to their judgment, the economic growth of 2013, successful

implementations of economic anti-cycle policies and the laws that started coming into effect after the new year, have positively influenced

thereon. However, in order to make the prediction real, it is necessary to eliminate the present adverse economical situations, implement

certain policy and increase the foreign currency flow. As for mining sector, coal export which is a main product for export, has decreased

and is still the same yet. As of April, although the coal export has increased by 7.1% in tangible form, from the previous year, it was

reduced by 19.5% in form of pecuniary amount. However, income from the copper export has increased twice from the previous year thus

influenced to increase the export income by total amount. By 2012, the copper export that was less by 2.3 times than the coal export

amount, has surpassed the income from coal thus put more income by almost 2 times than goal, in the foreign trade. Apart from increasing

the export income, the import income has gone down by 12.3% from the previous year thus the foreign trade loss was reduced by keeping

balance. Despite the fact that it is an adverse sign of decreasing the purchase ability, it is to reduce the payment balance burden during the

short time period.

Continuous deterioration of hard currency rate and inflation in double digital are considerably burdening activities of private sector and the

people’s life. The adverse effects are, first of all, related to reduction of the inward flow of foreign currency and the Bank of Mongolia

explains that this is not barely economic crisis but it is a crisis of the payment balance. As well as there has direct foreign investment

amounting to totally 292.8 USD in the first quarter of 2014 and reduced by 2.9 times (843.9 million USD), in comparison of the previous

year. Both S&P and Moody’s have reduced the indebtedness of Mongolia in April and May. Reduction of foreign investment and the

currency flow, becomes burdens on the economics and on the other hand, increase of foreign debt and reduction of the foreign currency

reserve, are worsening the executive capacity of foreign payment settlement. In order to improve the present situations, the government

made a decision to transfer the budget to economical regime and announced “Economic acceleration 100 days” as well as such works as

increase of the foreign currency flow, export income and foreign investment, support of national manufacturers and business engagers,

increase of mining and mineral resources production, acceleration of construction-industry and infrastructure, improvement of economic

potentials and infrastructure of provinces and attraction of foreign investment, have been planned. As a result of these measures, the export

income and foreign direct investment are deemed to increase, while the flow of foreign currency will be improved. This will enable an

increased foreign net active, secured financial and macro sustainability and create a sustainable economic growth.

The money supply (M2) reached MNT 10.2 trillion

M2 rose 42% from the last year and 2.9% from the previous

month reaching MNT 10.2 trillion or USD 5.72 billion.

Currency issued in circulation rose by 5% from the previous

month and remains 10.8% higher than the previous year to

be MNT 841.6 billion. Currency issued in circulation

amounts to 8.2% of the M2.

Foreign currency deposits decreased, Total deposits

amounted to MNT 7.2 trillion, which is 70.5% of M2 in

April. This is an increase of 0.1% compared to the previous

month and 53.1% compared to the previous year. Of these,

79.8% was in MNT and 20.2% was in foreign currency.

This shows an increase of 10.4% in MNT deposits and

decrease of 27.3% in foreign currency depostis in April.

Non-performing loans rose in April

Loans outstanding reached MNT 11.7 trillion or USD 6.58

billion. It increased by 3.1% compared to last month and

51.2% compared to the same period last year. Non-

performing loans increased by 98.5% from last year

accounting to 5.2% of the total amount of loans. The annual

interest rate (weighted average) for loans in MNT increased

by 0.3 percentage points and decreased by 1.1 percentage

points for loans in foreign currency from last year reaching

19.4 per cent and 12.1 per cent respectively.

Monthly highlights

> The Prime Minister Altankhuyag wrote a letter to Rio Tinto Chief Executive Officer Sam Walsh, concerning to intensify

on financing the underground mine’s further development of Oyu Tolgoi Project.

> The 3th annual meeting of Mongolian Investment Summit was held in London.

> The government is financing the construction Buyant Ukhaa 1 Apartment Town of 28 apartment buildings for 1,764

households, the first phase of 567 apartments orders continues. The Number of citizens who want to live in apartments next

month will chosen by lottery.

8.9

7.7

8.1 8.2

789101112

4

6

8

10

01'14 02'14 03'14 04'14

Money supply

M2 (left)

(MNT trillion, at the end of month) (%)

4.2 4.0

5.2 5.2

2

4

6

8

10

0

2

4

6

8

10

12

14

02'13 03'13 02'14 03'14

Loans

Loans

outstanding

(left)

Share of Non-

performing

loans (right)

(%(MNT trillion, at the end of month)

4.9 4.7 7.2 7.2

02468

02'13 03'13 02'14 03'14

Deposits Foreign

currency

MNT

(MNT trillion, at the end of month)

Economic Policy and Competitiveness Research Center

www.ecrc.mn

MONTHLY MACROECONOMIC OVERVIEW

April 2014

As of the first quarter, although the growth of economics could not overtake the year with higher growth (for the first quarter of 2012,

domestic gross products increased by 15.9%), it increased by 0.3 unit that is 7.4%. Although there have been adverse effects such as

sudden deterioration of currency rate, high inflation etc, in the economics, increase of agriculture, industry and construction influenced the

economics to be still energetic. Pursuant to estimation by International Organizations and the Government, the economic growth will be

9.5%-12.9% that is in double digital. In addition, the World Bank predicted that the economic growth of 2014 of our country would reach

11.4% by increasing from 10.3% that was deemed it last October. According to their judgment, the economic growth of 2013, successful

implementations of economic anti-cycle policies and the laws that started coming into effect after the new year, have positively influenced

thereon. However, in order to make the prediction real, it is necessary to eliminate the present adverse economical situations, implement

certain policy and increase the foreign currency flow. As for mining sector, coal export which is a main product for export, has decreased

and is still the same yet. As of April, although the coal export has increased by 7.1% in tangible form, from the previous year, it was

reduced by 19.5% in form of pecuniary amount. However, income from the copper export has increased twice from the previous year thus

influenced to increase the export income by total amount. By 2012, the copper export that was less by 2.3 times than the coal export

amount, has surpassed the income from coal thus put more income by almost 2 times than goal, in the foreign trade. Apart from increasing

the export income, the import income has gone down by 12.3% from the previous year thus the foreign trade loss was reduced by keeping

balance. Despite the fact that it is an adverse sign of decreasing the purchase ability, it is to reduce the payment balance burden during the

short time period.

Continuous deterioration of hard currency rate and inflation in double digital are considerably burdening activities of private sector and the

people’s life. The adverse effects are, first of all, related to reduction of the inward flow of foreign currency and the Bank of Mongolia

explains that this is not barely economic crisis but it is a crisis of the payment balance. As well as there has direct foreign investment

amounting to totally 292.8 USD in the first quarter of 2014 and reduced by 2.9 times (843.9 million USD), in comparison of the previous

year. Both S&P and Moody’s have reduced the indebtedness of Mongolia in April and May. Reduction of foreign investment and the

currency flow, becomes burdens on the economics and on the other hand, increase of foreign debt and reduction of the foreign currency

reserve, are worsening the executive capacity of foreign payment settlement. In order to improve the present situations, the government

made a decision to transfer the budget to economical regime and announced “Economic acceleration 100 days” as well as such works as

increase of the foreign currency flow, export income and foreign investment, support of national manufacturers and business engagers,

increase of mining and mineral resources production, acceleration of construction-industry and infrastructure, improvement of economic

potentials and infrastructure of provinces and attraction of foreign investment, have been planned. As a result of these measures, the export

income and foreign direct investment are deemed to increase, while the flow of foreign currency will be improved. This will enable an

increased foreign net active, secured financial and macro sustainability and create a sustainable economic growth.

Economic Policy and Competitiveness Research Center

www.ecrc.mn

MONTHLY MACROECONOMIC OVERVIEW

April 2014

Economic Policy and Competitiveness Research Center

www.ecrc.mn