ID :
140279
Wed, 09/01/2010 - 14:31
Auther :
Shortlink :
http://m.oananews.org//node/140279
The shortlink copeid
MONGOLIA QAURTERLY ECONOMIC UPDATE ISSUED BY WORLD BANK
(continuation)
EXTERNAL SECTOR
Mongolia's export sector continues to recover, supported by buoyant commodity prices
The 12-month rolling trade deficit has stabilized in recent months, narrowing to USD 221 million in May 2010, from USD 1082 million in March 2009. The sustained recovery of Mongolia's exports has been supported by upward momentum in metal prices and increasing copper and coal imports by China, Mongolia's largest trading partner. Although Chinese metal imports are slowing, they have continued to rise at a robust pace in recent months, with copper imports in April the third largest on record.
Overall, the continued strength in metals prices this year has been due to the recovery of demand and restocking outside of China. Copper prices have recorded their highest average price (USD 7,745/ton in April) since the commodity price collapse of mid-2008, although they have since decreased to USD 6,838/ton in May. There are concerns that prices decline further, as they are possibly overinflated relative to fundamentals, and particularly if the global recovery falters due to the ongoing sovereign debt crisis in Europe.
Mongolia's gold exports remain depressed compared to previous years. This is despite gold prices touching record highs again in recent months, driven by investor concerns about financial stability about the EU sovereign debt crisis, and by the metal's continuing appeal as a currency and inflation hedge. Imports meanwhile continue to rise as the economy recovers, driven by rising demand for transport equipment and machinery.
In May the dollar value of goods imports was up by 45 per cent year-on-year, compared with contractions of over 50 per cent in the first half of 2009. The latest numbers also show a falling contribution of imports of minerals products. These are mostly diesel and petroleum that suggest a decrease in stockpiling as the operating season has already started for key sectors such as mining, construction and agriculture.
The export recovery has helped the current account balance improve following its sharp deterioration in late 2008 and early 2009
Due to the sharp fall in the value of exports the current account balance moved from a surplus of 6.7 per cent of GDP in 2007 to a deficit of 14 per cent in 2008 and climbing to over 15 per cent in the first two quarters of 2009. However, as a result of the improved goods deficit, the current account deficit narrowed to 9 per cent of GDP in the first quarter of 2010, after peaking at 16 percent in Q1 of 2009.
The deficit in services trade also improved but remains at 3 per cent of GDP (compared with a high of around 4 percent in Q1 of 2009) as transport and tourism receipts remain depressed. Overall for the first quarter of 2010, the current account deficit increased to USD 424 million from USD 382 million in Q4 of 2009. It was primarily financed by net capital inflows in the financial account,13 which amounted to USD 821 million in the first quarter of 2010. Net foreign direct investments increased by about 16 percent in the first quarter compared to the previous quarter, mainly due to investment inflows into the mining sector. Net borrowing from abroad continued to increase, due to the donor disbursement and loans to the commercial banks. While net remittances stayed about the same on 4-quarter rolling sum basis, the actual inflow increased by about 43 per cent in the first quarter of 2010 compared to the same period in
2009.
(to be continued)
EXTERNAL SECTOR
Mongolia's export sector continues to recover, supported by buoyant commodity prices
The 12-month rolling trade deficit has stabilized in recent months, narrowing to USD 221 million in May 2010, from USD 1082 million in March 2009. The sustained recovery of Mongolia's exports has been supported by upward momentum in metal prices and increasing copper and coal imports by China, Mongolia's largest trading partner. Although Chinese metal imports are slowing, they have continued to rise at a robust pace in recent months, with copper imports in April the third largest on record.
Overall, the continued strength in metals prices this year has been due to the recovery of demand and restocking outside of China. Copper prices have recorded their highest average price (USD 7,745/ton in April) since the commodity price collapse of mid-2008, although they have since decreased to USD 6,838/ton in May. There are concerns that prices decline further, as they are possibly overinflated relative to fundamentals, and particularly if the global recovery falters due to the ongoing sovereign debt crisis in Europe.
Mongolia's gold exports remain depressed compared to previous years. This is despite gold prices touching record highs again in recent months, driven by investor concerns about financial stability about the EU sovereign debt crisis, and by the metal's continuing appeal as a currency and inflation hedge. Imports meanwhile continue to rise as the economy recovers, driven by rising demand for transport equipment and machinery.
In May the dollar value of goods imports was up by 45 per cent year-on-year, compared with contractions of over 50 per cent in the first half of 2009. The latest numbers also show a falling contribution of imports of minerals products. These are mostly diesel and petroleum that suggest a decrease in stockpiling as the operating season has already started for key sectors such as mining, construction and agriculture.
The export recovery has helped the current account balance improve following its sharp deterioration in late 2008 and early 2009
Due to the sharp fall in the value of exports the current account balance moved from a surplus of 6.7 per cent of GDP in 2007 to a deficit of 14 per cent in 2008 and climbing to over 15 per cent in the first two quarters of 2009. However, as a result of the improved goods deficit, the current account deficit narrowed to 9 per cent of GDP in the first quarter of 2010, after peaking at 16 percent in Q1 of 2009.
The deficit in services trade also improved but remains at 3 per cent of GDP (compared with a high of around 4 percent in Q1 of 2009) as transport and tourism receipts remain depressed. Overall for the first quarter of 2010, the current account deficit increased to USD 424 million from USD 382 million in Q4 of 2009. It was primarily financed by net capital inflows in the financial account,13 which amounted to USD 821 million in the first quarter of 2010. Net foreign direct investments increased by about 16 percent in the first quarter compared to the previous quarter, mainly due to investment inflows into the mining sector. Net borrowing from abroad continued to increase, due to the donor disbursement and loans to the commercial banks. While net remittances stayed about the same on 4-quarter rolling sum basis, the actual inflow increased by about 43 per cent in the first quarter of 2010 compared to the same period in
2009.
(to be continued)
