Mongolia’s prospects bright, only with proper fiscal management: World Bank
The World Bank has said in its latest quarterly report that Mongolia’s economic prospects in the medium term look excellent from the perspective of both growth and fiscal management.
Staying the course in the medium term, however, means implementing the landmark Fiscal Stability Law (FSL) passed last year, and adopting a supportive integrated budget law this spring session of parliament.
The last quarter of 2010 ended with a broad-based recovery, supported by transportation, construction and wholesale and retail trade. For the employment of the poorest segments of society, the agriculture sector (down 17 percent yoy in 2010) experienced double digit contractions in all four quarters in 2010. March data show a moderation in inflation. However, food prices are rising in Russia and China, from where Mongolia imports the bulk of its main food commodities.
The latest fiscal data show continued improvement in the budget outturns. On a 12-month rolling basis, the fiscal surplus increased to 2.4 percent of GDP in March 2011, up from a 5 percent deficit in March last year. The 2011 Budget of Mongolia envisages a steep increase in government spending to an unprecedented MNT 779 billion (over 52 percent of GDP).
Imports increased to record levels of 86 percent yoy in March as the trade deficit continued to widen reaching USD646 million. Exports were up 71 percent yoy supported by the upward momentum in metal prices and large coal and copper imports by China, which absorbs 90 percent of Mongolia’s exports.
In the banking sector, the steady rise in NPL ratios in 2009 has been reversed. However, there continue to exist solvency concerns for small and medium banks. With credit growing fast, as was the case prior to the 2008 crisis, regulatory and oversight issues among Mongolian banks (along with capital adequacy) remain crucial.
Due to the increased activity in the construction sector, the number of informal workers in construction material markets rose while the number of informal workers declined in the other markets. Workers’ real informal market wages on average increased by about 18 percent from December to March 2011, due to improved weather and moderated inflation. Of the most vulnerable in society, about 40 percent of those surveyed continue to indicate that their earnings do not meet their basic needs, while the rest rely on these markets for food and shelter only.
The report says Mongolia has the opportunity now to exercise prudent fiscal and macroeconomic policies so it can steer clear of the mistakes made by other resource rich economies and achieve its potential.
Source : News.mn
Staying the course in the medium term, however, means implementing the landmark Fiscal Stability Law (FSL) passed last year, and adopting a supportive integrated budget law this spring session of parliament.
The last quarter of 2010 ended with a broad-based recovery, supported by transportation, construction and wholesale and retail trade. For the employment of the poorest segments of society, the agriculture sector (down 17 percent yoy in 2010) experienced double digit contractions in all four quarters in 2010. March data show a moderation in inflation. However, food prices are rising in Russia and China, from where Mongolia imports the bulk of its main food commodities.
The latest fiscal data show continued improvement in the budget outturns. On a 12-month rolling basis, the fiscal surplus increased to 2.4 percent of GDP in March 2011, up from a 5 percent deficit in March last year. The 2011 Budget of Mongolia envisages a steep increase in government spending to an unprecedented MNT 779 billion (over 52 percent of GDP).
Imports increased to record levels of 86 percent yoy in March as the trade deficit continued to widen reaching USD646 million. Exports were up 71 percent yoy supported by the upward momentum in metal prices and large coal and copper imports by China, which absorbs 90 percent of Mongolia’s exports.
In the banking sector, the steady rise in NPL ratios in 2009 has been reversed. However, there continue to exist solvency concerns for small and medium banks. With credit growing fast, as was the case prior to the 2008 crisis, regulatory and oversight issues among Mongolian banks (along with capital adequacy) remain crucial.
Due to the increased activity in the construction sector, the number of informal workers in construction material markets rose while the number of informal workers declined in the other markets. Workers’ real informal market wages on average increased by about 18 percent from December to March 2011, due to improved weather and moderated inflation. Of the most vulnerable in society, about 40 percent of those surveyed continue to indicate that their earnings do not meet their basic needs, while the rest rely on these markets for food and shelter only.
The report says Mongolia has the opportunity now to exercise prudent fiscal and macroeconomic policies so it can steer clear of the mistakes made by other resource rich economies and achieve its potential.
Source : News.mn
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