BANKING SECTOR REVIEW: 3rd quarter of year 2022

A long winter awaits

The indicators of the banking sector were relatively stable and growing. The banking sector’s total assets increased by 1 percent compared to last year’s period. Non-performing loans are expected to increase. Due to the uncertainty of the external environment, citizens have a high interest in saving and keeping foreign currency, which has contributed to the decrease in MNT deposits.

Supply and logistics difficulties due to the Russia-Ukraine issue and the situation of the pandemic affect the prices of the main products of Mongolia and are the main reasons for the high inflation rate.

Also, the slow recovery of the mining and transportation sectors has a negative impact on economic growth, but the relatively fast recovery of the services, trade, construction, and agriculture sectors had a significant impact on the economy growing by 3.7 percent.

Loan growth in the banking sector, which has been the sole supporter of economic sectors during the pandemic, continues. It has been seen that the economy will not be able to grow steadily if the difficulties of transport and logistics are not solved step by step and the recovery of the mining and transport industry is not supported.

The balance of payments deficit in the last 3 consecutive quarters not only puts pressure on foreign exchange reserves but also poses a high risk of reducing the purchasing power of MNT.

Depending on the how economic situation changes in the last quarter of this year, the period of the “winter” in the economy will be determined. Furthermore, there is a scenario has been formed that Mongolia might need to stabilize the economy through the implementation of the new IMF program.

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