ID :
93955
Wed, 12/09/2009 - 12:07
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https://oananews.org//node/93955
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WB'S MONGOLIA MONTHLY BRIEF – NOVEMBER 2009
Ulaanbaatar. /MONTSAME/. World Bank has released a Mongolia monthly report on economic situation. The report's brief version is as follows:
"On November 27, 2009, Parliament approved the 2010 budget which projects a 5 percent of GDP deficit and two new laws were passed supporting social welfare reforms. However, Parliament had to increase the copper price assumption to achieve the deficit target. A significant increase in total social spending was also approved, including that under a newly created Human Development Fund (HDF) which is earmarked to pay pension and health insurance, housing, education and health services, and cash transfers to Mongolian citizens. Since budget allocations to the “old” cash transfers to newlyweds, newborns, and child money programs, approved during the mining boom years, have been cut, analysts hope that creation of the HDF will pave the way for implementation of comprehensive social welfare reform with the view of moving towards a targeted new poverty benefit, using
objective allocation criteria. With respect to the budget outturn for this year, the 12-month rolling deficit improved somewhat in October, reflecting both reduced expenditures and stabilization of the revenue decline. However, it remains at around 9 percent of GDP. While the long-term fiscal outlook looks good, because of future large increases in revenues from the mining sector, the medium-term scenario until 2015 looks more uncertain. In particular, 2011 will see the Windfall Profits Tax disappear and, in the absence of continued donor funding, a series of large fiscal deficits would be difficult and costly to finance.
On the external sector, the trends of recent months have continued—narrowing of the trade deficit and accumulation of
international reserves and stability of the nominal exchange rate. Indeed the export contraction seems to be bottoming out and the imports decline moderating. Preliminary balance of payment figures for Q3 indicate a narrowing of the current account deficit to US$470 million (10.9 percent of GDP), after it peaked in the first quarter of 2009. In banking sector developments, Zoos Bank was taken into receivership at the end of November 2009. Anod Bank was also, finally, put under receivership. To date, the Zoos Bank situation
does not seem to have had an adverse impact on overall confidence levels, likely in part reflecting the blanket deposit
guarantee which was put in place from November, 2008, in response to the failure of Anod Bank. However, non-performing
loans continue to increase across key sectors of the economy, including individual lending, construction and agriculture, and
banks remain exposed to the failure of large individual borrowers. Real deposit and borrowing rates also continue to be
at extremely high levels. Average real loan rates of almost 25 percent are very high by international standards.
Third quarter real GDP data, down by 3.7 percent year-on-year after growth of 0.7 percent in the second quarter, along with recent industrial production figures, highlight the continued weakness in the real sector. The latest World Bank commissioned survey of the daily wage of unskilled workers in key informal labor markets in Ulaanbaatar in December 2009 also shows no improvements in real income relative to September 2009, pointing to continued economic stagnation and the on-set of winter. New analysis by the World Bank of poverty trends between 2002/3 and 2007/8 using the national household survey data from the NSO, but using the same, absolute poverty line in both years, shows a sharp reduction in poverty during that period of high economic growth. Recall that the official consumption-based poverty headcount in 2007/8 was 35.2%, as estimated by the NSO. Working backwards from that benchmark and using a consistent poverty line over time, World Bank staff calculations indicate that the poverty headcount in Mongolia declined from 66.2% in 2002/3. This finding of substantial poverty reduction over this period is robust to the choice of the poverty line used. Finally, a recently released analysis of the civil service in Mongolia suggests three main challenges to improving its
efficiency. First, the civil service grading and compensation system requires significant changes in order to be able to attract and retain high caliber staff. Second, movement in a phased manner towards centralized payroll administration is required in order to increase control over staff numbers and personnel expenditures. Third, the personnel management regime needs to be improved as it presently does not fully protect civil servants from undue political interference."
S.Batbayar
"On November 27, 2009, Parliament approved the 2010 budget which projects a 5 percent of GDP deficit and two new laws were passed supporting social welfare reforms. However, Parliament had to increase the copper price assumption to achieve the deficit target. A significant increase in total social spending was also approved, including that under a newly created Human Development Fund (HDF) which is earmarked to pay pension and health insurance, housing, education and health services, and cash transfers to Mongolian citizens. Since budget allocations to the “old” cash transfers to newlyweds, newborns, and child money programs, approved during the mining boom years, have been cut, analysts hope that creation of the HDF will pave the way for implementation of comprehensive social welfare reform with the view of moving towards a targeted new poverty benefit, using
objective allocation criteria. With respect to the budget outturn for this year, the 12-month rolling deficit improved somewhat in October, reflecting both reduced expenditures and stabilization of the revenue decline. However, it remains at around 9 percent of GDP. While the long-term fiscal outlook looks good, because of future large increases in revenues from the mining sector, the medium-term scenario until 2015 looks more uncertain. In particular, 2011 will see the Windfall Profits Tax disappear and, in the absence of continued donor funding, a series of large fiscal deficits would be difficult and costly to finance.
On the external sector, the trends of recent months have continued—narrowing of the trade deficit and accumulation of
international reserves and stability of the nominal exchange rate. Indeed the export contraction seems to be bottoming out and the imports decline moderating. Preliminary balance of payment figures for Q3 indicate a narrowing of the current account deficit to US$470 million (10.9 percent of GDP), after it peaked in the first quarter of 2009. In banking sector developments, Zoos Bank was taken into receivership at the end of November 2009. Anod Bank was also, finally, put under receivership. To date, the Zoos Bank situation
does not seem to have had an adverse impact on overall confidence levels, likely in part reflecting the blanket deposit
guarantee which was put in place from November, 2008, in response to the failure of Anod Bank. However, non-performing
loans continue to increase across key sectors of the economy, including individual lending, construction and agriculture, and
banks remain exposed to the failure of large individual borrowers. Real deposit and borrowing rates also continue to be
at extremely high levels. Average real loan rates of almost 25 percent are very high by international standards.
Third quarter real GDP data, down by 3.7 percent year-on-year after growth of 0.7 percent in the second quarter, along with recent industrial production figures, highlight the continued weakness in the real sector. The latest World Bank commissioned survey of the daily wage of unskilled workers in key informal labor markets in Ulaanbaatar in December 2009 also shows no improvements in real income relative to September 2009, pointing to continued economic stagnation and the on-set of winter. New analysis by the World Bank of poverty trends between 2002/3 and 2007/8 using the national household survey data from the NSO, but using the same, absolute poverty line in both years, shows a sharp reduction in poverty during that period of high economic growth. Recall that the official consumption-based poverty headcount in 2007/8 was 35.2%, as estimated by the NSO. Working backwards from that benchmark and using a consistent poverty line over time, World Bank staff calculations indicate that the poverty headcount in Mongolia declined from 66.2% in 2002/3. This finding of substantial poverty reduction over this period is robust to the choice of the poverty line used. Finally, a recently released analysis of the civil service in Mongolia suggests three main challenges to improving its
efficiency. First, the civil service grading and compensation system requires significant changes in order to be able to attract and retain high caliber staff. Second, movement in a phased manner towards centralized payroll administration is required in order to increase control over staff numbers and personnel expenditures. Third, the personnel management regime needs to be improved as it presently does not fully protect civil servants from undue political interference."
S.Batbayar
