COUNTRY PRESENTATION ON MONGOLIA

Sep 2013by Mr. Boldbaatar D.

Director, Monetary policy and Research Department

9/12/2013

Bank of Mongolia

§ In 1924 a joint Mongolian-Russian bank, called the "Tradeand Industry Bank of Mongolia"was opened with a singlebranch.

§ In 1991, a completely new 2

level banking system wasestablished in Mongolia.

§ The Bank of Mongolia implements State monetary and credit policy byperforming the duties of a central bank in a market economy:

…issuing banknotes, ensuring stability of Tugrug ₮, …determining the reserve ratio of commercial banks …carrying out unified interest rate policy and inter-bank settlements …managing inter-bank and government lending …supervision of commercial banks, etc.

Key indicators

Mongolia Population (millions)………………………..……………. 2.8GDP (US$ billions,2012)………..................…………. 10.3GDP per capita (US$,2012)……………………………. 3,325Unemployment rate (%)…………………………………8.2Poverty Headcount (Nat.ave,2012)…………………..27.4Religions……………………………………………………..Buddhism

PROPORTION OF URBAN AND RURAL POPULATIONPROPORTION OF URBAN AND RURAL POPULATION

PROPORTION OF URBAN AND RURAL POPULATION

Source: Global competitiveness report 2013

Poverty Headcount (in percent)

Overview of banking and financial system

Overview of banking and financial system

2008200920102011201220132008

2008

40801201604040

80

80

120

120

160

160

Loan to deposit ratio8 year average

8 year average

Loan to deposit ratio

§ The growth of private sector credit accelerated to 42%in July (y/y). Deposit growth amounted to 8% (y/y).

Bank credit and deposits

200920102011201220132009

2009

-40-20020406080100-40

-40

-20

-20

0

0

20

20

40

40

60

60

80

80

100

100

CreditsDeposits

Deposits

Credits

§ Banks’ loan-to-deposit ratio has now risensubstantially above the average for the past 8 years.

Commercial banks' Loan-to-Deposit (L/D) ratio

§ The easing of monetary policy and inflation nowseems to be translating into lower bank lending rates.

Commercial banks' interest rates (% per annual, endof period)

§ New regulations to strengthen bank capitalization arebeing phased in amid low reported NPLs.

Bank Capitalization and Asset Quality

200920102011201220132009

2009

01020300

0

10

10

20

20

Inflation annual

Inflation annual

Financial inclusion in Mongolia§ Adults with an account at a formal financial institution :

by gender (in %) by education (in %)

by age (in %) by urban/rural residence (in %)

Formal account, Primary or lessFormal account, Secondary or moreFormal account, Primary or less

Formal account, Primary or less

Formal account, Secondary or more

Formal account, Secondary or more

0204060801000

0

20

20

40

40

60

60

80

80

100

100

MongoliaEast Asia & Pacific (developing only)Lower middle incomeLower middle income East Asia & Pacific (developing only)Mongolia

male (% age 15+)female (% age 15+)male (% age 15+)

male (% age 15+)

female (% age 15+)

female (% age 15+)

0204060801000

0

20

20

40

40

60

60

80

80

100

100

MongoliaEast Asia & Pacific (developing only)Lower middle incomeLower middle income East Asia & Pacific (developing only)Mongolia

Young adults (% ages 15-24)Older adults (% age 25+)Young adults (% ages 15-24)

Young adults (% ages 15-24)

Older adults (% age 25+)

Older adults (% age 25+)

0204060800

0

20

20

40

40

60

60

MongoliaEast Asia & Pacific (developing only)Lower middle incomeLower middle income East Asia & Pacific (developing only)Mongolia Rural (% age 15+)Urban (% age 15+)Rural (% age 15+)

Rural (% age 15+)

Urban (% age 15+)

Urban (% age 15+)

0204060800

0

20

20

40

40

60

60

80

80

MongoliaEast Asia & Pacific (developing only)Lower middle incomeLower middle income East Asia & Pacific (developing only)Mongolia

Source: World bank

International trade

0.4810.6780.7410.6450.7390.8480.9210.9260.860.481

0.481

0.678

0.678

0.741

0.741

0.645

0.645

0.739

0.739

0.848

0.848

0.921

0.921

0.926

0.926

0.86

0.86

200520062007200820092010201120122013-72005

2005

2007

2007

2009

2009

2011

2011

2013-7

2013-7

0%20%40%60%80%100%0%

0%

20%

20%

40%

40%

60%

60%

80%

80%

100%

100%

ChinaRussiaOther

Other

Russia

China

0.2490.3530.2720.3690.3130.3460.2740.3830.2520.3620.3050.3330.3080.2440.2760.2740.2690.2330.249

0.249

0.353

0.353

0.272

0.272

0.369

0.369

0.313

0.313

0.346

0.346

0.274

0.274

0.383

0.383

0.252

0.252

0.362

0.362

0.305

0.305

0.333

0.333

0.308

0.308

0.244

0.244

0.276

0.276

0.274

0.274

0.269

0.269

0.233

0.233

200520062007200820092010201120122013-72005

2005

2007

2007

2009

2009

2011

2011

2013-7

2013-7

0%20%40%60%80%100%0%

0%

20%

20%

40%

40%

60%

60%

80%

80%

100%

100%

ChinaRussiaOther

Other

Russia

China

§ Exports by country § Imports by country

§ … by main export commodities

(in percentage) (in percentage)

0.2070.1740.160.320.210.270.210.260.207

0.207

0.174

0.174

0.16

0.16

0.32

0.32

0.21

0.21

0.27

0.27

0.21

0.21

0.26

0.26

2010201120122013-720102010

20112011

20122012

2013-72013-7

00.40.81.20

0

0.4

0.4

0.8

0.8

OthersFoodsConsumer goodsPetroleum products.Inputs of production

Inputs of production

Petroleum products.

Consumer goods

Foods

Others

§ …by main import commodities

(in percentage) (in percentage)

0.2660.1620.2660.3020.20.470.190.430.20.250.266

0.266

0.162

0.162

0.266

0.266

0.302

0.302

0.2

0.2

0.47

0.47

0.19

0.19

0.43

0.43

0.2

0.2

0.25

0.25

20092010201120122013-720092009

20102010

20112011

20122012

2013-72013-7

00.40.81.20

0

0.4

0.4

0.8

0.8

OthersCashmereOther mineral productsCrude oilIron ores and concentratesCopper concentrateCoal

Coal

Copper concentrate

Iron ores and concentrates

Crude oil

Other mineral products

Cashmere

Others

International trade

§ The value of the three -month moving average of thedifference of annual growth rates of exports andimports has been decreasing since September 2012and as of June 2013 it is –5%

Trade Balance (12-month rolling sums, in US$m,)

§ As of July 2013, terms of trade index (2000 base year)decreased by 12.8% from that of the previous yearand reached 1.359. This decrease in the terms of tradeis mainly attributed to the fall in ex-port prices ofexporting commodities.

Changes in terms of trade

Commercial banks' interest rates (% per annual, endof period)

§ New regulations to strengthen bank capitalization arebeing phased in amid low reported NPLs..

Bank Capitalization and Asset Quality

The trade deficit continues to be large.

Source: Bank of Mongolia Source: Bank of Mongolia

International trade

§ The exchange rate is trending upward and appreciatingmore than in copper-producing peer countries (e.g. Chileand Peru).

Exchange rate (y/y)(₮/$, a rise denotes a real appreciation. Jan. 10-June 13)

§ Amid strong overall export performance, non-mineralexports have underperformed but a recent pickup isvisible.

Export performance relative to other Asian countries(2006Q1=100, 3mma, January 2008-July 2013)

The trade deficit continues to be large.

Source: IMF and Bank of Mongolia Source: IMF and Bank of Mongolia

20102011201220132010

2010

-0.16-0.12-0.08-0.0400.040.080.120.160.2-0.16

-0.16

-0.12

-0.12

-0.08

-0.08

-0.04

-0.04

0

0

0.04

0.04

0.08

0.08

0.12

0.12

0.16

0.16

0.2

0.2

MongoliaChileLao P.D.RPeru

Peru

Lao P.D.R

Chile

Mongolia

Overview of macroeconomic developments

§ Growth reached to 11.3 percent (y/y) in thesecond quarter of 2013 from 4.2 percent (y/y) inthe first quarter.

Real GDP growth (Contribution and y/y percentagechange)

§ Inflation, was double-digit in 2012, decelerated to7 percent in July 2013.

Consumer price index (%, annual inflation)

2008200920102011201220132008

2008

2011

2011

-0.0400.040.080.120.160.20.240.28-0.04

-0.04

0

0

0.04

0.04

0.08

0.08

0.12

0.12

0.16

0.16

0.2

0.2

0.24

0.24

AgricultureMining industryServicesNon-mining industryNet taxes

Net taxes

Non-mining industry

Services

Mining industry

Agriculture

20102011201220132010

2010

-0.0400.040.080.120.160.20.240.28-0.04

-0.04

0

0

0.04

0.04

0.08

0.08

0.12

0.12

0.16

0.16

0.2

0.2

0.24

0.24

Food items (contribution to headline CPI)Non-food items (contribution to headline CPI)

Non-food items (contribution to headline CPI)

Food items (contribution to headline CPI)

The economy expanded by 11 percent during the first half of 2013 despite slowing exportsand FDI inflows…

Source: National statistical office Source: National statistical office

Thank you for your attention