REPORT

1. Mongolia
Selected Macroeconomic Indicators
June 2013
For further information, please contact:
SSelenge@imf.org

2. 2
Figure 1. Mongolia: Real Sector Developments
Growth decelerated to 7.2 percent in the first quarter of 2013 on slowing exports and FDI inflows.
Mongolia’s growth has been impressive.... …contributing to a decline in poverty.
Real GDP growth decelerated to 7.2 percent in 2013Q1(y/y)
Industrial output during February-April was 8 percent
higher than during the same period last year.
International copper prices are down 7 percent so far this
year, compared to the first 5 months of 2012.
Coal export volumes continue to slump.
-5
0
5
10
15
20
-5
0
5
10
15
20
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
China
Mongolia
Sources: Mongolian authorities; and IMF staff estimates.
Real GDP growth rate: China vs. Mongolia
(Year-on-year percent change)
0
5
10
15
20
25
30
35
40
45
50
National Urban Rural
2010 2011 2012
Mongolia: Poverty Headcount
(In percent)
Source: Mongolian authorities.
-10
-5
0
5
10
15
20
25
-10
-5
0
5
10
15
20
25
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
Agriculture
Non-miningindustry
Services
Net taxes
Miningindustry
GDP at market prices (y/y growth)
Sources: Mongolian authorities; and IMF staff estimates.
Real GDP Growth
(Contribution and Year-on-Year Percentage Change, 2008Q1-2013Q1)
-30
-20
-10
0
10
20
30
-30
-20
-10
0
10
20
30
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Gross Industrial Output
Non-mineral Industrial Output
Mineral Industrial Output
Industrial production
(12-month percentage change in 3mma , March 2008-April 2013)
Sources: Mongolian Authorities; and IMF Staff Estimates.
0
2,000
4,000
6,000
8,000
10,000
0
2,000
4,000
6,000
8,000
10,000
Spot Rate (London Metal Exchange)
Budget price (from 2011: FSL-based structural price 1/)
Price in amended budget
International Copper Price
(U.S. dollars per metric ton, January 1, 2008-May 29, 2013)
Sources: Bloomberg LP; Mongolian Authorities; and IMF staff estimates.
1/
The structural price is the average of the past 12 years and projections for the current and subsequent 3 years.
Structuralprices as perFSL 1/
-40
-20
0
20
40
60
80
100
120
-40
-20
0
20
40
60
80
100
120
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
volume growth (y/y, 3mma)
volume growth (y/y, 12mma)
Sources: Mongolian authorities; and IMF staff estimates.
Coal Export Volume
(Change, in percent, January 2011-April 2013)

3. 3
Figure 2. Mongolia: Overview of Macroeconomic Developments
Expansionary fiscal policy has supported growth but also put pressure on inflation
and the current account. The successful international bond issuance pushed up reserves.
Strong demand growth in recent years may have
outstripped the growth of Mongolia’s production capacity….
…contributing to double-digit inflation in 2012. Inflation
decelerated to 9.8 percent in April.
Expansionary fiscal policy was the main driver of the
acceleration of inflation in 2012.
It also kept the current account significantly in deficit even
as imports for the FDI-financed OT mine wound down.
The nominal exchange rate has been quite stable,
putting the REER on an appreciating trend.
Chinggis bond proceeds raised reserves in 2012; they
are now drifting lower on external sector weakness.
-18
-16
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Mineral Output Gap (in percent of mineral GDP, RHS)
Non-mineral Output Gap (in percent of Non-mineral GDP, RHS)
GDP (in bil Tog, LHS)
Potential GDP (in bil Tog, LHS)
Output gap (in percent of GDP, RHS)
Sources: Mongolian authorities; and IMF staff estimates.
Output Gap Estimates
(based on HP filter)
-10
-5
0
5
10
15
20
25
30
35
-10
-5
0
5
10
15
20
25
30
35
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Non-food items (contribution to headline CPI)
Food items (contribution to headline CPI)
Headline CPI (y/y)
Non-food CPI (y/y)
Food CPI (y/y)
Sources: Mongolian authorities; and IMF staff estimates.
Consumer Price Inflation
(in percent, January 2008-April 2013)
-25
-20
-15
-10
-5
0
-25
-20
-15
-10
-5
0
2005 2006 2007 2008 2009 2010 2011 2012
Non-mineral (NM) balance
Larger NM deficit due to DBM social-benefit spending
Sources: Mongolian authorities; and IMF staff estimates.
Non-mineral fiscal balance
(in percent of non-mineral GDP)
60
70
80
90
100
110
120
130
140
150
60
70
80
90
100
110
120
130
140
150
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Renminbi/Togrog NEER REER U.S. dollar/Togrog
Sources: Mongolian authorities; and IMF staff estimates.
Exchange Rates of the Togrog
(Index, Jan. 2005=100, an increase in the index is an appreciation)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Sources: Mongolian authorities; and IMF staff estimates.
Gross International Reserves
(In millions of U.S. dollars, January 1, 2009-April 30, 2013)

4. 4
Figure 3. Mongolia: Fiscal Development
Expansionary fiscal policy pushed the deficit to 10 percent of GDP in 2012.
Revenue performed well in April, increasing by 17 percent
year-on-year. On-budget spending was contained,
contributing to a MNT 57 billion surplus in April.
Including capital spending settled in Q1 of 2013, the 2012
fiscal deficit reached 8.4 percent of GDP. Including DBM
spending, the deficit exceeded 10 percent of GDP in 2012.
Spending now exceeds 55 percent of non-mineral GDP… …and the non-mining deficit topped the 2008 record.
Thus continuing the pattern of pro-cyclical fiscal policy.
The Chinggis bond (US$1.5bn) and DBM bond (US$0.6bn)
raised public debt. But the money remains mostly unspent.
-40
-20
0
20
40
60
80
100
-40
-20
0
20
40
60
80
100
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Revenue
Expenditure
Sources: Mongolian authorities; and IMF staff estimates.
Revenues and Expenditure (excl. DBM)
(Twelve-month percentage change in 3mma, Jan. 2008-April 2013)
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
2005 2006 2007 2008 2009 2010 2011 2012
Overall balance
Increase in deficit owing to DBM social-benefit spending 1/
Sources: Mongolian authorities; and IMF staff estimates.
Fiscal balance
(in percent of GDP)
0
10
20
30
40
50
60
70
0
10
20
30
40
50
60
70
2005 2006 2007 2008 2009 2010 2011 2012
Non-mineral rev.
Expenditure
DBM spending on social-benefit projects 1/
Sources: Mongolian authorities; and IMF staff estimates.
1/The DevelopmentBankof Mongoliaprovidedloansof US$ 190 million for non-revenue generatingpublicinvestmentprojects
suchas roads("social benefitprojects") in2012. The budgetwill needto repaythese loans.
Non-Mineral Revenue and Expenditure
(in percent of non-mineral GDP)
-25
-20
-15
-10
-5
0
-25
-20
-15
-10
-5
0
2005 2006 2007 2008 2009 2010 2011 2012
Non-mineral (NM) balance
Larger NM deficit due to DBM social-benefit spending
Sources: Mongolian authorities; and IMF staff estimates.
Non-mineral fiscal balance
(in percent of non-mineral GDP)
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012
Annual change of non-min. GDP gap
Annual change of CAB (inverse)
Sources: Mongolian authorities; and IMF staff estimates.
2/ The cyclically adjusted fiscal balance is the overall balance net of cyclical effects. Cyclical effects are computed using country specific
elasticities of aggregagerevenueand expenditure series. In this case, the elasticityassumptions are 1 for revenue and 0 for spending.
Cyclically-adjusted fiscal balance (CAB) vs. Output gap
(in percent of potential non-mineral GDP)
0
10
20
30
40
50
60
0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010 2011 2012
Public debt
Public debt (net of unspent amount)
NPV of public debt
NPV of public debt (net of unspent amount)
Public debt
(in percent of GDP)
Sources: Mongolian authorities; and IMF staff esimates.

5. 5
Figure 4. Mongolia: External Sector Development
Expansionary macroeconomic policies and slowing exports have pushed up the trade deficit.
Import growth has slowed owing to the near completion of
the OT project and despite the expansionary fiscal policy.
Weak exports have turned export growth negative. The 12-
month trade deficit has started to ease but so has FDI.
The REER is trending upward and appreciating more than in
copper-producing peer countries (e.g. Chile and Peru).
Overall export performance is strong but non-mineral
exports are underperforming.
Mongolia’s sovereign spread has stabilized at about 100
basis points above the average for emerging markets.
Stock prices of 3 mining companies operating mostly in
Mongolia (MMC, TRQ, South Gobi) have slumped.
-60
-40
-20
0
20
40
60
80
100
120
140
-60
-40
-20
0
20
40
60
80
100
120
140
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Exports
Imports
Sources: Mongolian authorities; and IMF staff estimates.
Imports and Exports
(Twelve-month percentage change in 3mma, Jan. 2008-Apr. 2013)
-7,000
-6,000
-5,000
-4,000
-3,000
-2,000
-1,000
01,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Trade balance (in mil USD, 12-month rollingsum, RHS)
Total export (in mil USD, 12-month rollingsum, fob, LHS)
Total imports (in mil USD, 12-month rollingsum, cif, LHS)
Trade Balance
(12-month rolling sums, in US$m, Jan. 2008-Apr. 2013)
Sources: Mongolian authorities; and IMF staff estimates.
90
100
110
120
130
140
150
90
100
110
120
130
140
150
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Chile Lao P.D.R. Peru Mongolia
Source: IMF INS.
Real Effective Exchange Rates
(Index, 2005=100; a rise denotes a real appreciation. Jan. 08-Mar. 13)
50
100
150
200
250
300
350
400
450
500
50
100
150
200
250
300
350
400
450
500
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
High-income countries
Middle and low income countries
Mongolia: Non-mineral exports
Mongolia: Total exports
Sources: Haver Analytics; CEIC Data Company; and IMF staff estimates.
Note: High-income countries include Australia, New Zealand, Japan, Korea, Singapore, and
Taiwan; Middle- andlow-income countries include Indonesia, Philippines; Sri Lanka, Vietnam,
Bangladesh, andIndia.
Export Performance relative to other Asian countries
(2006Q1=100, 3mma, sa, January 2008-April 2013)
0
100
200
300
400
500
600
700
0
100
200
300
400
500
600
700
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Mongolia Philippines
Emerging mrkts. (EMEs) Sri Lanka
Vietnam Mongolia spread over EMEs
Source: Bloomberg LP.
JP Morgan EMBI Global Sovereign Spreads
(in basis points, January 1, 2012-May 29, 2013)
0
20
40
60
80
100
120
140
160
0
20
40
60
80
100
120
140
160
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Mong. Mining Corp. (MMC, in HK)
Turquoise Hill (in Toronto)
South Gobi (in HK)
Rio Tinto (London)
Sources: Bloomberg LP.; and IMF staff estimates.
Stock Prices for Mining Companies
(Index, January 1, 2011=100, Jan. 1, 2008-May 29, 2013)
Return since Jan.1, 2011
(in percent) _
MMC (coal) -77
TRQ (copper) -68
South Gobi(coal) -87
Rio Tinto (diverse) -38
Copper price -25

6. 6
Figure 5. Mongolia: Monetary Development
Bank lending picked up in March. Bank capitalization is improving, in line with new regulations.
The growth of bank credit picked up in April, to 31 percent
(y/y). Deposit growth slowed to 13 percent (y/y).
Banks’ loan-to-deposit ratio has been rising steadily in
recent months.
Banks are holding substantial overall excess reserves with
the Bank of Mongolia, mostly in foreign currency.
The easing of inflation has not yet translated into lower
bank lending rates, possibly because of seasonal factors.
In two steps, the Bank of Mongolia’s Monetary Policy
Committee lowered the policy rate 175 bps, to 11.5 percent.
New regulations to strengthen bank capitalization are
being phased in amid low reported NPLs.
-40
-20
0
20
40
60
80
100
120
140
-40
-20
0
20
40
60
80
100
120
140
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
Credit Deposits
Sources: Mongolian authorities; and IMF staff estimates.
Bank Credit and Deposits
(Quarter-on-Quarter change, in percent (saar), Jan. 2008-Apr. 2013)
70
80
90
100
110
120
130
140
70
80
90
100
110
120
130
140
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
8-year average
L/D-ratio (incl. government deposits)
8-year average
Headline L/D ratio
Commercial banks' Loan-to-Deposit (L/D) ratio
(January 2008-April 2013)
Sources: Mongolian authorities; and IMF staff estimates.
0
5
10
15
20
25
30
35
40
0
100
200
300
400
500
600
700
800
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Dec-12
Excess reserves on togrog deposits (in MNT bn, LHS)
Excess reserves on forex deposits (in MNT bn, LHS)
Required reserve rate (in percent, RHS)
Excess reserves (in percent of reserve money, RHS)
Sources: Mongolian authorities; and IMF staff estimates.
Excess Reserves
(June 2009-April 30, 2013)
0
5
10
15
20
25
30
0
5
10
15
20
25
30
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Headline CPI
Lending rate (in togrog, 1 year)
Lending rate (in US$, 1 year)
Deposit rate (in togrog, average 1 year)
Deposit rate (in US$, average 1 year)
Interest Rates
(Percent per annum, end-of-period, Jan. 2009-Apr. 2013)
Sources: Mongolian authorities; and IMF staff estimates.
0
2
4
6
8
10
12
14
16
18
20
0
200
400
600
800
1,000
1,200
1,400
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
CBBs outstanding (in billions of togrogs, LHS)
7-day CBB rate (in percent, RHS)
84-day CBB rate (in percent, RHS)
Sources: Mongolian authorities; and IMF staff estimates.
Central Bank Bills (CBBs)
(January 1, 2009-May 29, 2013)
0
2
4
6
8
10
12
14
16
18
20
22
24
0
2
4
6
8
10
12
14
16
18
20
22
24
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Nonperforming loans to total loans
Bank capital to risk-weighted assets
Bank Capitalization and Asset Quality
(In percent, January 2009-April 2013)
Sources: Mongolian authorities; and IMF staff estimates.