Mining Sector to Lead Economic Growth in 2013
In the last few years, Mongolia has enjoyed enormous growthin its gross domestic products (GDP) mainly thanks to the increased mining activity in the country. The Oyu Tolgoi project is expected to commence operations in their underground mine where majority of the wealth lies, which will boost the country’s production to a new level.
The government has managed raise 1.5 billion USD through the release of the much publicised Chinggis Bonds, which will be used for infrastructure development. Government spending is bound to increase which will fuel inflation.
Inflation reached over 15 percent in 2012 while GDP growth decreased to around 13 percent which was 17.3 percent in 2011. Despite IMF’s warning about decreasing spending, the government has plans for a large scale spending spree for this year to develop infrastructure through the bond money.
The Economic Intelligence Unit of Economic Group forecasts that Mongolia will be second largest economic grower in the year of 2012, mainly driven by mineral export to China.
Mongolia was one of the top economic growers, if not the top grower of 2012.
All of the above will play parts in oscillating the pendulum that is Mongolia economy, therefore we at the UBpost feel it right to let the country’s top economic experts to have a say in what direction they think the economy of the nation will swing.
The following are the economic projections of Mongolia’s top economists of this year.
Director of “Mongol” University and Economist N.Dashzeveg: GDP growth will be in double digits
-The fact that the Oyu Tolgoi Mines will commence operations next (this) year will significantly contribute in the increase our GDP. In any case, I think the growth will be measured in double digits. What will happen to coal price isn’t certain yet. But, I think at least 20 million tonne coal will be exported. Though it is said that the inflation will be kept at eight percent, the possibility of this actualizing has not been seen. Tremendous amount of money flow is coming into the market; 1.5 billion USD. In such a case it is very difficult to keep inflation level at bay at eight percent. At this point, the government should have made the forecast for the next four years. This should be done by the Ministry of Economic Development. They should have made the projections for the upcoming ten years and introduced the projects they will implement in four years’ time. Sadly, nothing has been revealed up until today. This shouldn’t be going on like this.
Director of Institute of Finance and Economics of Mongolia, Economist B.Batjargal: The economic prospect looks very positive
-The economy looks positive. The shadow of the world economic recession didn’t cast on Mongolia too badly. I think we can overcome such hurdles with the policy we form and implement. The reason I think this is because of the policies approved by the government that we are implementing and enforcing at the moment. The government has released 1.5 billion USD sovereign bonds. It is said that this bond will be used for infrastructure development and projects that will boost the economy. This is the right thing to do. Apart from this, the artificially created inflation that is on the market at the moment has to be stopped. Mongolia has begun to fight against, the falsely created inflation, price fixing and oligarchy market. The government and the Mongolbanks are taking avid actions to eliminate causeless price rising. If these actions are thoroughly execute, Mongolian economy need not fear inflation anymore. On top of this, if the bond money is spent not on social care and elimination of policy loopholes but rather on industrial development and infrastructure development, Mongolia economic prospect looks very good indeed.
Economist of Economic Study Institute of Mongolian National University, B.Tuvshintugs: Dependency on mining and mineral resource sector is likely to increase
-Mongolian economic growth is likely to be more than ten percent in 2013. The reason is that the Oyu Tolgoi is about to commence operations and the government is planning a major expansion in the budget. It is highly likely that inflation rate will increase as a result. For instance, it is very likely that it will venture beyond the aimed eight percent inflation rate. On the other hand, our nation will be more dependent on the prices of main goods sold on the international market. Our dependency will depend of copper and gold prices. Furthermore, since mining production will increase, our economy’s dependence on mineral resource and mining will increase as well. Therefore it is important to set and follow a government policies that are suitable to the current condition. The policies should start by fitting the government bond project to the budget stabilization policy. More attention should be paid to separating government implemented projects from the monetary policy.
Member of Financial Market Union, Economist, G.Otgonjargal: Not just mining and mineral sector but travel, tourism and agricultural sector will expand
-The economy looks positive. Though foreign direct investment flows have been decreasing, the government bonds are making up for them. The commencement of large scale infrastructure projects is the main mover of the economy. The roads and construction sector is to expand the most, this means sectors that in relation to them will also develop and enlarge. Of course when Oyu Tolgoi begins operations and start producing copper, the exports will obviously boost the mining sector for sure. I think that, the travel, tourism and agricultural sector will experience substantial growth too. For example, enduring winter has become challenging and the chance of animals and live stocks dying in great numbers has become a very real possibility. Also the number of overdue loans by construction and mining sector from commercial banks is worrisome. It is estimated that GDP growth will be at least 10 percent in 2013. On top of this, if the production of Oyu Tolgoi and the boost it will have on the economy is added to the economic growth, the GDP could grow as much as 17 percent. Therefore, the GDP growth might as well beat the 17.3 percent of growth experience in 2011. I expect the policies to fight inflation rate will have some positive effects too.
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