Reuters: Fitch – Mongolia election won’t solve credit pressures

The Mongolian economy is overheating, fueled by a mining boom and soaring government spending, but promises from the newly elected coalition parties to distribute the spoils of mineral wealth means fiscal buffers are unlikely to be significantly strengthened after the election. This makes Mongolia vulnerable to a re-run of its 2007-2009 economic crisis if prices for the country’s commodity exports fall sharply for a sustained period. Mongolia has only saved 2% of GDP in its Stabilisation Fund, which is too small to shelter it from shocks. This leaves the country with little fiscal flexibility in the event of a sustained drop in commodity prices. The accumulation of systemic risks – extremely loose credit environment, inconsistencies arising from implementation of tight monetary policy, and expansionary fiscal policy and pro-cyclical public finances – makes this increasingly hard to fix. To read the full article, click hereFitch – Mongolia election won’t solve credit pressures

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