179 thousand jobs have been saved

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A conference was held on issues regarding central bank’s method on stimulating economy last week among young economists. NextGen youth movement organized the annual Mongolian Economic Dilemma conference with the support of Central Bank emphasizing Economic situation and Monetary Policy. The agenda covered various topics around current economic conditions, however it was mainly focused on M2 money supply.

The conference opening statement started with that in 2008, 2009, 2011 money supply worsened disrupting the flow in the economy, then in 2012 they implemented a policy to prevent economic fall down. If the central bank hadn’t injected MNT2.8 trillion MNT as of end of third quarter, M2 would have been reduced by 27% percent. Perhaps, there would have been a more sever consequences if the central bank hadn’t took this action.

World Bank forecast was around 17% of economic growth, however, as of today we recorded 14.3%. Then, it has been said that 170 thousand jobs would have been lost, and economic growth rate would have fallen down by 9.6%. Nevertheless, despite the overrated mining sector, we witnessed that it can have a negative effect on foreign trade and investment activities. In the other hand, agriculture and construction sector made a significant contribution to the growth. These have been always favourable sectors for the country. Private sector overall contribution to the growth was 54% – after their ‘hard work’. We can see that businesses have huge role despite just making profit for themselves. They pay taxes, provide salaries, create jobs, and expands their goods and services.

Since, 2009 loan rate went trough recession by the rate it hadn’t to be, but after the money supply policy, loan rate increased by 46.6%, making its growth steady. The mortgage policy that had been implemented this year also contributed to this. The MNT900 billion savings injected into banks made them possible to issue mortgages today.

Companionship between money supply and inflation

It was the first time in the country’s 23 year old free-market economic history that the central bank kept the inflation in a single digit number by increasing money supply, Bold from Central Bank emphasized. There was critics stating that inflation will shoot up if the money supply was increased, however the inflation is now at 9.8%. Without it, the inflation would have reached to 30-40%. It also has been said that by providing discounted loans to the producers and businesses, the dose was just about right. Basically, it depends on to whom the money supply is being reached.

250 products are included in calculating inflation. The young economists mentioned that the basket needs to be updated due to current economic situation. It is regarding the luxurious goods such as cell phone, cars, and real-estate. Due to the consumer choice these days, the luxurious goods are affecting the daily normal goods.

 

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