Moody’s Investors Service revised the issuer ratings of Mongolia from stable to negative but the previous status of the long-term B3 rating was unchanged. The decision to change the rating outlook to negative reflects rising external vulnerability risks related to a sharp fall in export revenue, widening the current account deficit to about 15 percent to 20 percent of GDP in 2020 amid declined demand for commodities, said the rating agency. This is mainly influenced by rating drops. Moreover, the government’s borrowing requirements are expected to increase markedly, in part to fund a large stimulus package, which raises liquidity risks. As of the first three months, deficits in the current account increased by two times to USD 767 million from a year ago. Government spending during the coronavirus outbreak is estimated to widen the fiscal deficit to 8.5 percent of GDP in 2020. Moody’s projects the economy’s reserves to fall to USD three billion by the end of the year from USD 4.4 billion as of February. This comes at a time when access to external financing is highly uncertain. In the current environment of heightened uncertainty about Mongolia’s capacity to generate export revenue and obtain external financing at moderate costs and in a timely fashion, there is a risk that funding pressures will increase (not yet acute), Moody’s said. Previously, the Bank of Mongolia (BoM) highlighted the importance of not downgrading the credit rating due to the expected external debt.

Published Date:2020-05-13