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Inflation rises above BoM target www.zgm.mn
National Statistics Office (NSO) released the year-end preliminary results of social and economic situations of Mongolia yesterday. The year-end economic indicators were mostly positive as expected thanks to mining sector boom and the implementation of the International Monetary Fund program; however, inflation peaked above the Bank of Mongolia’s (BoM) target level for the second month in December 2018 following the rise in fuel prices and consumption.
2018 was rather generous for Mongolia considering the fact that the economy grew by 6.3 percent in the first half. At the time, the Asian Development Bank highlighted that this was “driven by the expansion of investments in the mining sector and an increase in household consumption on the back of improved household loan grants.” As mentioned, consumer loan played its role in the economy. However, growing inflation is drawback for increased consumption. Consumer loan pushes households to pay three-quarters of their income to loans, creating a situation where the consumer could face bigger risk from the loan repayment.
According to the report, the inflation measured by the national consumer price index increased by 8.1 percent from the previous year. NSO explained that the growth was mainly contributed by increases in prices of food and non-alcoholic beverages by 9.1 percent and alcoholic beverages and tobacco by 8 percent, transport by 9.7 percent, housing, water, electricity, and fuels by 16.3 percent, and health by 11.4 percent.
The Monetary Policy Committee reached a decision to limit household debt-to-income ratio at 70 percent and set the maturity of non-mortgage commercials to not exceed 30 months, which took effect on January 1, 2019. Plus, petroleum price was lowered by MNT 100 this week; thus, economists expect the inflation to stabilize in the upcoming months.
Additionally, the total trade turnover reached USD 12.9 billion as of December 2018, of which exports totaled USD 7 billion and imports - USD 5.9 billion. Compared to the same period of the previous year, export increased by 13.1 percent and import by 35.5 percent. Money supply reached MNT 19.5 trillion in November, displaying MNT 3.6 trillion growth (4.4 percent) year over year. The currency issued in circulation totaled MNT 968.6 billion, an 8.2 percent increase. Additionally, the nominal average exchange rate of the MNT against the USD announced by the Bank of Mongolia depreciated by 8.4 percent from the previous year and fell 3.8 percent against CNY.
Published Date:2019-01-16
