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Mongolia monthly brief (August 2009) (Inglês)

: In addition to highlighting the latest developments, this economic update also summarizes the main economic, fiscal, and financial developments in Mongolia for the year since July 2008, when Mongolia was hit by a large, external shock due to the collapse of the copper price. This shock hit Mongolia harder than other copper producers, because of the country's particular combination of expansive fiscal and monetary policies, a fixed exchange rate and an overheated financial sector at the time of the copper price collapse. In the update, Mongolia's performance during the copper price collapse is compared with that of the other major copper exporters: Chile, Peru, Papua New Guinea, and Zambia. The government's initial slow and inappropriate response led to a period of macroeconomic instability around the end of the year. However, the government took strong policy actions at the beginning of 2009 to address the crisis. Based on the commitment shown by these actions, the country subsequently benefited from substantial financial assistance from its key development partners. The latest developments show that the fiscal balance remains under pressure, as revenues have continued to drop, whereas expenditures remained constant. The trade balance has improved, but this is in part caused by the economic downturn itself, which has seen imports drop faster than exports. In the financial sector, deposits have recovered after large withdrawals earlier in the year. However, non-performing loans have continued to increase, and bank lending to the private sector has come to a virtual standstill, as banks prefer to invest in central bank bills instead. This has put further downward pressure on domestic activity. Formal unemployment has continued to increase since the beginning of the year, and real wages for unskilled labor in the informal sector have been hit very hard.




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