30.10.2012 Monetary policies to sustain Mongolia's future growth, N. Zoljargal
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This document discusses the role of the Bank of Mongolia (BOM) in promoting sustainable economic growth in Mongolia. It provides an overview of Mongolia's strong economic growth and macroeconomic stability. It outlines the BOM's coordinated monetary and financial policies to maintain low and stable inflation while supporting continued growth. These include developing Mongolia's financial infrastructure through reforms to deposit insurance, social security systems, and mortgage and government bond markets. The goal is to establish sustainable, balanced growth through coordinated fiscal and monetary policies while strengthening Mongolia's financial system.
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30.10.2012 Monetary policies to sustain Mongolia's future growth, N. Zoljargal
- 1. The role of BOM: Sustainable growth Zoljargal Naidansuren Governor BANK OF MONGOLIA (BOM) October 30-31, 2012 Hong Kong
- 2. 2 Outline • Macroeconomic overview • Coordinated macro policy Strong middle class • Financial infrastructure and institutional development
- 3. 3 Sustainable & balanced growth over 10% Source: Bank of Mongolia, IMF, NSO 10.2% -1.3% 17.5% 13.2% 16.8% 12.7% 8.0% 15.2% 8.3% -5% 0% 5% 10% 15% 20% 0 2 4 6 8 10 12 2006 2007 2008 2009 2010 2011 2012* 2013** 2014** 2015** 2016** 2017** BillionUSD Real GDP Growth, yoy, RHS Linear (Growth, yoy, RHS)
- 4. 4 Growth prospects in Asian emerging economies Source: WEO April 2012, IMF 17.5 8.0 6.9 6.1 6.3 13.2 8.2 8.1 7.0 7.5 15.2 -2 0 2 4 6 8 10 12 14 16 18 20 China India Indonesia Vietnam Mongolia % 2011 2012* 2016*
- 5. 5 Trade and FX turnover 0 1 2 3 4 5 6 2009 2010 2011 2012 Billion $ Foreign trade turnover 1H of each year Imports Exports 0 2 4 6 8 10 12 14 2009 2010 2011 2012 Billion $ FX turnover 1H of each year FX outflows FX inflows Source: Bank of Mongolia, Customs General Office, Mongolia
- 6. 6 Balance of payments and gross international reserves -36 162 166 581 38 181 -13 -177 359 112 -1500 -1000 -500 0 500 1000 1500 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Capital & financial account Current account Overall BOP 0 2 4 6 8 10 12 0 500 1,000 1,500 2,000 2,500 3,000 2007/01 05 09 2008/01 05 09 2009/01 05 09 2010/01 05 09 2011/01 05 09 2012/01 05 MillionUSD Gross reserves Import coverage, months (RHS) Source: Bank of Mongolia
- 7. 7 Exchange rate system Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER) 2010 FLOATINGMONGOLIA No exchange rate target at all BOM Intervention is only for smoothing excessive volatility No capital control Positive expectation on overall FX net flows
- 8. 8 FX net flows and reference exchange rate Source: Bank of Mongolia Stability since March 2009 Daily average volatility: only 0.08% in 2012
- 9. 9 Is MNT a volatile currency? Currencies (last 32 months) Daily average volatility (%) Maximum depreciation per day (%) Maximum appreciation per day (%) Australian dollar 0.62% 4.35% 3.00% Canadian dollar 0.46% 3.36% 2.06% New Zealand dollar 0.65% 5.03% 2.44% Russian ruble 0.49% 3.18% 2.55% Chilean peso 0.49% 4.78% 2.24% South African rand 0.70% 5.03% 3.39% Brazilian real 0.66% 5.05% 3.76% Norwegian kroner 0.62% 3.31% 2.82% Tanzanian schilling 0.36% 5.15% 9.34% Papua New Guinea kina 0.18% 3.39% 3.20% Mongolian togrog 0.20% 1.26% 1.69% 0.52% 4.26% 3.48%
- 10. 10 Money supply -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2008-01 2008-04 2008-07 2008-10 2009-01 2009-04 2009-07 2009-10 2010-01 2010-04 2010-07 2010-10 2011-01 2011-04 2011-07 2011-10 2012-01 2012-04 2012-07 Billiontogrog M2 YoY change Source: Bank of Mongolia
- 11. 11 Inflation dynamic Source: Bank of Mongolia Demand pull inflation: Monetary policy instruments Cost push inflation: Price stabilization program with the Government
- 12. 12 Inflation target & projection 0 5 10 15 20 0 5 10 15 20 2011 I 2011 II 2011 III 2011 IV 2012 I 2012 II 2012 III 2012 IV 2013 I 2013 II 2013 III 2013 IV %% Source: Bank of Mongolia Inflation target: (end-2013): 8% (2014-2015): 6%
- 13. 13 Banking sector: Assets and outstanding loans -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 0 2,000 4,000 6,000 8,000 10,000 12,000 2005-03 2005-11 2006-07 2007-03 2007-11 2008-07 2009-03 2009-11 2010-07 2011-03 2011-11 2012-07 Total Assets YoY change Since the crisis: +260% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2006-01 2006-07 2007-01 2007-07 2008-01 2008-07 2009-01 2009-07 2010-01 2010-07 2011-01 2011-07 2012-01 2012-07 Billiontogrog Loans outstanding NPL to loan ratio Source: Bank of Mongolia
- 14. 14 Mortgage market Developed countries 45% 40% 38% 36% 13% 10% 6% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Герман Япон Хонгконг Сингапур Солонгос БНХАУ Монгол Mortgage / GDP 2011 Japan HongKong Singapore Korea China Mongolia Source: European Mortgage Federation, www.economywatch.com IMF, Financial Stability Board Germany
- 15. 15 Coordinated macro policy Strong middle class! • Fiscal policy Countercyclical – Adhere to Fiscal Stability Law – Fiscal anchors and Stabilization fund – Public investments to abolish supply constraints and increase absorption capacity – Targeted social welfare program – Reform of social insurance fund • Monetary policy – Low and stable inflation Macro stability and sustainable long-term growth – Financial stability Macro and micro prudential measures – Flexible exchange rate – Financial infrastructure and institutional development – Special programs with the Government to stabilize supply driven inflation
- 16. 16 Financial infrastructure and institutional development • Reform on deposit insurance scheme frameworks – Replacing blanket deposit guarantee (reducing risk to government) – Enhancing discipline and responsibility of banking sector • Reform on social security system – Separating social security fund from budget – Investing domestic capital market (development projects, mortgage market) • Developing mortgage market – MBS domestic offering – MBS access to foreign investors • Developing Government bond market – New procedure introduced – Secondary market development (benchmark yield curve)
- 17. 17 Government bond market development • New procedure introduced on 24 October 2012 – Providing primary and secondary market development – Strengthening fiscal and monetary policies’ coordination – Using T-bills as a monetary policy tool • Some important dedication on the New procedure – MOF to issue Government securities at regular basis – BOM to conduct treasury auction – Commercial banks acting as primary dealers Bond issued by Sep 2012: MNT 609.6 billion Bond to issue by Dec 2012: MNT 270 billion
- 18. 18 Importance of Government Bond Market Development Fiscal Policy Monetary Policy Market development Investment Opportunity • Financing the budget deficit • Financing the public investments • Using T-bills as a monetary policy tool • Coordinating fiscal & monetary policy • MNT benchmark yield curve • Development of financial instruments • Liquid asset • Low risk investment • Tax exemption on interest earnings Ministry of Finance Bank of Mongolia Commercial banks Institutional & Private Investors • Issuing government securities • Conducting treasury auction • Acting as primary dealers Primarymarket Secondarymarket
- 19. Bank of Mongolia (Central Bank) Baga toiruu-3, 15160 Ulaanbaatar 46, Mongolia Tel: +976-11-322169 Fax: +976-11-311471 http://www.mongolbank.mn Thank you for your kind attention Perfect timing and right place to invest in and cooperate with Mongolia