Policy-makers warn mineral price drop in 2019 www.zgm.mn
Bank of Mongolia has informed of a potential risk of weaker foreign trade conditions following a likely chance of slump in prices of Mongolia’s main export goods, namely copper, iron ore and coal. On the contrary, Mongolia's main import commodity, oil price is set to further increase in 2019. National Budget Stability Council explains that this could create unsatisfactory situation for budget revenue, which is the main risk for the economy. Davaasambuu Dalrai, Head of the council, warned that the lesser revenue will limit expenditure, ultimately obstructing planned projects. “In order to avoid potential risk of deadlock in multiple projects, the Government should choose a small number of reliable and necessary project,” suggested Mr. Davaasambuu. Ministry of Finance, on the other hand, determined price swing as the key potential risk in the budget revenue. For instance, the trade war between the U.S and China, the U.S sanction on Iran, economic crisis in Turkey and China’s policy on reducing iron production within the frame of reducing air pollution in Beijing caused instability in mineral prices since July.
Economist Enkhbayar Namjildorj remarked, “On the external side, the market demand of purchasing country, coupled with weak commodity prices remain are the key risks, while the internal risk is the domestic capabilities of developing the infrastructure.” The 2019 State Budget states to raise one-third of budget revenue from mining industry. Around 86 percent of mining revenue is expected to account for copper and coal exports. Specifically, balanced price of coal was estimated at USD 75.9 per ton and copper - USD 6,222 per ton. Additionally, the experts of International Monetary Fund, World Bank, National Reserve System of Australia and Bloomberg forecasted coal price to remain stable at 2018 level of USD 202 per ton. Amar Lkhagvasuren, Economics Officer at the Asian Development Bank Mongolia, highlighted, “Investments on Oyu Tolgoi is one of the key support for the economy. In the first half of this year, OT investments made up 12 percent of economic growth. Delay in schedule or obstruction of any kind will obviously have significant impact on the economy.”