Mon­go­lia GDP slows to weak­est since 2009 amid com­modi­ties crash

The Pak Banker - - MARKETS/SPORTS -

Mon­go­lia's gross do­mes­tic prod­uct slowed in 2015 to the weak­est pace since 2009, as for­eign in­vest­ment dried up amid pro­tracted dis­putes with in­vestors, drag­ging down an econ­omy al­ready bat­tered by weak com­modi­ties prices.

GDP by pro­duc­tion ap­proach ex­panded 2.3 per­cent from a year ear­lier, ac­cord­ing to pre­lim­i­nary data posted Tues­day on the Na­tional Sta­tis­ti­cal Of­fice's web­site. The econ­omy grew 7.8 per­cent in 2014, fol­low­ing three straight years of dou­ble-digit growth.

A steep drop in global com­mod­ity prices was the largest rea­son for the slow­down, Tu­vsh­in­tugs Bat­del­ger, the di­rec­tor of the Ulaan­baatar-based Eco­nomic Re­search In­sti­tute, said by phone.

Mon­go­lia ex­ported $3.68 bil­lion worth of min­eral prod­ucts in 2015 com­pared with $4.79 bil­lion a year ear­lier, ac­cord­ing to the NSO, a 23 per­cent de­cline. Min­er­als made up 79 per­cent of the to­tal ex­ports.

Coal led the way down as ex­port rev­enues de­clined to $555.9 mil­lion from $849 mil­lion. The value of Mon­go­lia's cop­per ex­ports fell to $2.28 bil­lion from $2.57 bil­lion a year ear­lier, even as vol­ume rose 7.2 per­cent. Mon­go­lia posted an­nual growth of as much as 17 per­cent four years ear­lier dur­ing con­struc­tion of the ini­tial phase of the Oyu Tol­goi cop­per mine, a $6.6 bil­lion in­vest­ment. "FDI plays a big role in the de­cline of the growth. And FDI has de­clined be­cause of com­mod­ity price de­clines,' said Tu­vsh­in­tugs.

For­eign in­vest­ment fell to $232 mil­lion in 2015 com­pared with $381.9 mil­lion a year ear­lier, a 39 per­cent drop. While FDI reached $4.45 bil­lion in 2012, it has been hin­dered by a slew of dis­putes with in­vestors, in­clud­ing a high pro­file spat with Rio Tinto Group over de­vel­op­ment of the Oyu Tol­goi mine.

The Mon­go­lian govern­ment and Rio fi­nally re­solved their dif­fer­ences and signed a $4.4 bil­lion pro­ject fi­nanc­ing pack­age in De­cem­ber, paving the way for a restart of the un­der­ground mine con­struc­tion later this year. Mon­go­lia's 2016 bud­get in­cludes a 4.1 per­cent GDP growth pro­jec­tion, ac­cord­ing to Man­duul Nya­man­de­leg, head of fi­nan­cial mar­kets and in­sur­ance divi­sion at the min­istry of fi­nance.

The World Bank had fore­cast 2.3 per­cent growth for 2015, and is pre­dict­ing a 0.8 per­cent ex­pan­sion for 2016 and 3 per­cent growth in 2017.

"Min­ing pro­duc­tion is pro­jected to de­cline in 2016-17 with lower min­eral con­cen­tra­tion in ores pro­duced by the OT mine and the weak global com­mod­ity mar­ket con­di­tions,'' the World Bank wrote its Novem­ber eco­nomic up­date.

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