Higher gold output can boost economies’ income status – WGC

Otmane El Rhazi from The Bullion Desk.

Higher gold production in emerging-market countries can assist them in becoming higher-income economies, the World Gold Council’s John Mulligan said.

Mulligan was speaking to FastMarkets after the launch of the WGC’s social and economic impact on gold report, which outlines the significant impact gold mining has had on local and global economies in 2013.

“Improving a country’s output of gold mining can undoubtedly result in a shift in income status,” he said.

The World Bank defines low-income economies as those with a gross national income (GNI) per capita of $1,045 or less in 2013; middle-income economies are those with a GNI per capita of more than $1,045 but below $12,746; and high-income economies are those with a GNI per capita of $12,746 or more.

In 2003, just six percent of 47 gold-producing countries, which account for 90 percent of global production, were classed as middle-to-upper-income economies, Mulligan said. By 2013, 43 percent of the same gold-producing countries had middle-income status.

The World Bank classed 33 of the 47 countries as low- or lower-middle income economies in 2003, with 14 of the countries classed as upper-middle or high income economies.

By 2013, of that same group of countries, 26 were classed as upper-middle or high-income economies while the number of low-income economies had dropped to five from 16.

“Whilst it would be misleading to claim that this improvement in national economies is a direct result of the growth of the gold mining industry, there is little doubt that the value created by the industry will have made an important contribution,” the WGC said in the report.

The World Bank recognised Peru – the world’s third-largest gold producer in 2013, according to the WGC – as a lower-middle-income country until 2008. Prior to 1995, Peru was not even among the top 10 producing nations.

Similarly, in 2007, China was classed as a lower-middle-income economy and was recognised as the fourth-largest gold-producing nation in the world, behind South Africa, Australia and the US.

By 2008, China had become the world’s largest producer – where it remains to this day – and by 2010 reached upper-middle-income status.

“The increase in Chinese gold production has been concurrent with the country’s growth. In many countries it can be a barometer for growth – in China it certainly is. It has developed in tandem with the country’s broader economic development,” Mulligan told FastMarkets.

The perceived slowdown in economic growth in China is unlikely to cause any problems for development in the gold mining space, he added, with the government eager to grow its gold mining sector.

(Editing by Mark Shaw)

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