REPORT

1. MONTHLY MACROECONOMIC OVERVIEW
September 2012
MAIN INDICATORS: GDP, STATE BUDGET, FOREIGN TRADE, EXCHANGE RATE, INFLATION
Source: NSO, BoM
The economic growth is 5.6% in the third quarter at
current price
GDP reached MNT 9.9 trillion or USD 7.1 billion at the
current price and MNT 3.9 trillion or USD 2.8 billion at the
2005 price in the first 3 quarters, up by 23.5% at the current
price and 10.2% at the 2005 price compared to the same
period of last year.
The real quarterly GDP growth (at current price) of 5.6% is
lower by 3.7 times than the third quarter of last year.
The budget deficit reaches MNT 0.6 trillion
The total state revenue of the budget increased by 12% and
expenditure increased by 38% which is 3 times higher than
revenue growth during the same period of the previous year,
representing a deficit of MNT 558 billion or USD 0.4
billion in the equilibrated balance.
The expansion of revenue was triggered by a 43% increase
in social insurance premium income, the 17% increase in
VAT, and the 47% increase in personal income tax. The
growth in spending was mainly due to the 81% increase in
capital expenditure, the 33% increase in subsidies and
transfers, and the 45% increase in wages and salaries.
The foreign trade deficit is USD 2.0 billion
In the first 9 months, total turnover of foreign trade reached
USD 8.5 billion, showing increases of 2.5% compared to
the same period of last year. It is a result of a 6.1% decline
in exports and a 8.7% increase in imports. The foreign trade
balance showed a deficit of USD 2.0 billion.
The changes of exports are primarily supported by a 7%
drop in coal, 16% drop of copper, 27% increase in iron ore
and 33% increase in crude petroleum oils compared to last
year. The increase in imports was mainly due to a 29%
increase in diesel, a 40% increase in petrol, and an 13%
increase in car compared to last year. Imports of trucks
decreased by 26% and imports of machinery for sorting,
screening, and mixing of stones decreased by 30%.
MNT exchange rate depreciates against the USD
The monthly average MNT exchange rate is 1395 and it
depreciated against the USD by 2.2% compared to the
previous month and 10.7% compared to the same period of
the previous year. The total amount of foreign currency
reserves reached USD 2.8 billion and rose by 4.6%
compared to the previous month and 10.0% compared to the
same period of the previous year.
The USD/MNT exchange rate is starting to appreciate
slightly from end of September.
Inflation rate doesn't decline from 14%
The nationwide inflation rate decreased by 0.1 percentage
points from last month and reached 14.8%. It is higher by
4.3 p.p. compared to the same period of the previous year.
The increase of average rates of prices was mainly due to
the 49% increase in alcoholic beverages and tobacco, the
22% increase in food price, and the 24% increase in
restaurants and hotels.
20.7 20.2
16.5
11.0
5.6
0
10
20
30
0
1
2
3
4
3Q11
4Q11
1Q12*
2Q12*
3У'12*
Economic growth
GDP, at current
price (left)
GDP growth,
quarterly, at
current price
(right)
(%)(MNT trillion)
3.1 2.9
0.2
3.5
4.0
(0.6)-1
0
1
2
3
4
5
Revenue Expenditure Balance
State budget
2011
2012
(MNT trillion, in first 9 months)
3.4
4.8
(1.4)
3.2
5.2
(2.0)-3
-2
-1
0
1
2
3
4
5
6
Export Import Balance
Foreign trade
2011
2012
1,395
1,200
1,300
1,400
09'11
10'11
11'11
12'11
01'12
02'12
03'12
04'12
05'12
06'12
07'12
08'12
09'12
Exchange rate
 - to depreciate
 - to appreciate
0.6
5.9
10.5
1.0
12.2
14.8
0
5
10
15
20
Monthly YTD YOY
Inflation
2011
2012
(1$=...₮, monthly average)
(Consumer price index growth, nationwide, in September)
(USD trillion, in first 9 months)
Economic Policy and Competitiveness Research Center
www.ecrc.mn

2. MONTHLY MACROECONOMIC OVERVIEW
September 2012
FINANCIAL SECTOR: MONEY SUPPLY, DEPOSITS, LOANS
Source: NSO, BoM
Summary
In the first 3 quarters of 2012, GDP reached MNT 9.9 trillion at current prices, a 23.5% increase compared to the previous
year. According to the NSO, Mongolia`s GDP is expected to grow by 12.4% in 2012 and reach MNT 14.2 trillion. Due to
the worsening global economic outlook, the IMF reduced Mongolia`s GDP growth forecast to 11.8%. Previously it was
expected to grow by 14% in coming 4 years. The state budget deficit reached MNT 0.6 trillion in September while the
foreign trade balance showed a deficit of USD 2 billion.
In 2011 Mongolia exported 21.3 million tons of coal and it was estimated to reach 30 million tons in 2012. However, due to
the slowdown in Chinese economy and its coal demand decline, Mongolia exported only 14 million tons of coal in first 9
months of 2012. Monthly coal exports, which has decreased 2 times in July and August compared to average of the first half
of this year, have started to recover from September. It is expected that this year coal exports will reach 20 million tons.
Monthly average MNT exchange rate reached 1,395, depreciating against USD. In the middle of September this rate reached
its peak amount of 1,402. However, in late September it decreased to 1,394 and to 1,380 in the first half of October. The
increasing price of food and high cost of alcoholic beverages and tobacco products due to the excise taxes contributed to
high inflation. The average price of consumer goods increased by 14.8% compared to the same period of last year and 1%
compared to the previous month. The bank of Mongolia has presented the directions of the 2013 monetary policy which
aims to bring down inflation to single digit in cooperation with the government. It is possible if the mutual understanding
between the central bank and government will be established. However, a more clear policy to reduce loan rates is needed.
Monthly deposits in national currency decline
The total amount of deposits increased by 24.3% compared
to the same period of the last year and increased by 3.7%
from last month. It reached MNT 4.6 trillion or USD 3.3
billion. Deposits in MNT and foreign currency increased by
10.5% and 67.5% separately compared to the same period
of the previous year. When compared to the last month,
deposits in MNT had no change while deposits in foreign
currency rose by 12.1%. Increase of deposits in foreign
currency depends on a high level of USD/MNT rate.
Non-performing loans start to increase
Loans outstanding reached MNT 6.9 trillion or USD 4.9
billion and increased by 2.9% compared to the previous
month and 35.7% compared to the same period of the
previous year. Non-performing loans increased by 14%
from last year, while it decreased by 1.9% compared last
month and it accounts for 4.5% of the total amount of loans.
The annual interest rate (weighted average) increased by 2.5
units for loans in MNT and 2.1 units for loans in foreign
currency from last year.
Monthly highlights
> The World Economic Forum released its Global Competitiveness Index - 2012. Mongolia has taken 3.87 points, stood in
93rd place out of 144 countries. It showed a stronger performance from last year (96 out of 142) but same result in points.
The currency issued in circulation decreases
M2 increased by 17.5% compared to the same period of the
previous year and increased by 1.6% compared to last
month. M2 reached MNT 7.1 trillion or USD 5.1 billion.
The currency issued in circulation increased by 5.7%
compared to the same period of last year and decreased by
8.5% from last month. It reached MNT 0.7 trillion and
accounts 10.5% of M2. The increase of money supply was
mainly due to increase of deposits in foreign currency.
> The Bank of Mongolia presented the directions of the 2013 monetary policy.
> The Parliament of Mongolia ratified amendment of State Budget of Mongolia 2012.
> The government announced to intention to raise up to USD 5 billion in debt financing over the next 2 years through the
issuance of bonds by the Development Bank of Mongolia. At first, they are going to prepare bonds for USD 1.5 billion.
> The government increased the excise tax to alcoholic beverages and tobacco and set out to allocate MNT 20 thousand per
child up to age 18, monthly.
12.0
11.6 11.6
10.5
10
11
12
13
14
5
6
7
08'11 09'11 08'12 09'12
Money supply
M2 (left)
Share of Currency
issued in
circulation (right)
(MNT trillion, at the end of month) (%)
3.6 3.7
4.4 4.6
0
2
3
5
6
08'11 09'11 08'12 09'12
Deposits
Foreign
currency
MNT
Total
7.7
7.1
4.7 4.5
2
4
6
8
10
0
2
4
6
8
08'11 09'11 08'12 09'12
Loans
Loans
outstanding (left)
Share of Non-
performing loans
(right)
(%)(MNT trillion, at the end of month)
(MNT trillion, at the end of month)
Economic Policy and Competitiveness Research Center
www.ecrc.mn