Meat and fuel prices trigger inflation to increase
Price rise of imported goods causes an increase in inflation
1 долоо хоног, 4 өдөр өмнө
Statistics show that nearly 80 percent of the inflation was caused by the rise in prices of meat and petroleum. For example, meat prices increased by over MNT 2,000 per kilogram last month.
In addition, the exchange rate was one of the main factors that affected inflation. The price of imported goods purchased on foreign currencies increased and this caused inflation. For example, the average USD rate increased 10 times or by 0.4 percent from the same period of the previous year. In addition, the CNY/MNT rate increased by 2.3 percent and RUB/MNT - 5.6 percent.
Mongolia buys most of its consumer goods from overseas to cover domestic demands and support household livelihood. The industrialization is not developed enough in Mongolia. Therefore, the FX rate changes the purchasing ability of people and inflation directly through imported goods.
In addition, the average household income and expenditure differ by MNT 36,000 at the end of last year. In particular, at the end of 2018, the average household income was MNT 1.2 million and the expenditure was MNT 1.23 million. However, three months later, the household expenditure has increased in the first quarter of this year, doubling the gap. In other words, rising prices have begun to stimulate public spending.
In the first five months of 2019, the Bank of Mongolia (BoM) purchased 4.2 tons of gold. BoM bought 1.8 tons of gold in May, which is about 200 kg increase compared to the same period of last year.
Gold is the main financial market tool for Mongolia. The country has decided to set gold royalty at 5 percent in March. As a result, the gold purchase, which was decreasing due to the uncertainty of the legal environment started to increase.
The BoM plans to buy 22 tons of gold this year. The amount of gold in Mongolia has raised the economy by USD 700-800 million and increases FX reserves of the BoM. If the global price of gold rises, Mongolia’s gold export earnings will increase and the BoM’s foreign currency reserves will also expand. This can help protect the financial market and the exchange rate against foreign and domestic risks.