The Mongolian government highlights a positive outlook driven by the mining sector, while acknowledging risks such as severe weather, inflation, and geopolitical uncertainties.
The Government of Mongolia submitted to the parliament an extensive review of the nation's macroeconomic outlook, highlighting growth driven by the mining sector and positive advancements in various industries. The macroeconomic forecast for 2024-2025 also acknowledges potential risks such as extreme weather, inflation, and geopolitical uncertainties.
Main Points:
The economy of Mongolia is forecasted to expand by 5.6% in 2024 and 8% in 2025, primarily driven by the mining sector, specifically the copper production of Oyu Tolgoi, and the increased export of coal and iron ore.
It is anticipated that inflation will hover around the upper threshold of the central bank's 6% target in 2024 and stabilize at 6% in 2025.
The government's strategies will concentrate on maintaining macroeconomic stability, diversifying the economy, fostering growth in the private sector, and enhancing the standard of living.
Potential risks involve energy deficiencies, severe weather conditions, livestock ailments, geopolitical uncertainties, and probable disruptions in the supply chain.
The expected consolidated budget deficit for Mongolia in 2025 is -1,930.5 billion MNT (-576.3 million USD). This amount signifies the variance between the minimum revenue required for a balanced consolidated budget and the maximum total expenditure. It also represents -2.0% of the estimated GDP for 2025.
The government seems to be mainly counting on the anticipation of continued stability in the global economy and mineral prices. This perspective might be seen as optimistic, considering the recognized risks of a global economic downturn and the volatile nature of commodity market changes.
Mongolia's Economic Growth:
While mining is a primary driver, growth in 2025 is projected to be broad-based, with contributions from non-mining sectors like manufacturing, agriculture, and services. This diversification is a positive sign for Mongolia's economic resilience.
Government policies are playing a significant role in fostering growth. These include promoting private sector development, facilitating trade, attracting foreign investment, and enhancing human capital.
Achieving the projected 8% GDP growth in 2025 relies on successful implementation of these policies and relatively favorable external conditions.
Macroeconomic Challenges in Mongolia:
In 2025, the government predicts a sustained robust economic growth for Mongolia, propelled by mining exports and favorable government measures. Nonetheless, the highlighted risks underscore the necessity of prudently handling resource income and taking strategic steps to counter the potential effects of external factors and weather conditions. The macroeconomic forecast for 2025 points out various risks that may impede economic expansion, such as:
Energy Shortages: The forecast underscores the pressing need to address Mongolia's energy shortfall, which could hinder growth across various sectors if not effectively dealt with.
Extreme Weather and Livestock Diseases: The recurring risk of dzud (severe winters) and other extreme weather events, along with the potential for outbreaks of animal diseases, present a significant threat to agricultural production and the well-being of herders.
Geopolitical Uncertainty: The forecast highlights conflicts in regions such as Ukraine and the Middle East as potential disruptors of global trade and commodity prices, with indirect implications for Mongolia.
Disruptions in the Supply Chain: Relying on the Tianjin port for imports exposes vulnerabilities to delays and price hikes, particularly in light of recent congestion issues at the port.
Government Strategies and Initiatives to Tackle Macroeconomic Obstacles:
Fiscal Policy: The government is working towards reducing budget deficits, enhancing fiscal discipline, and optimizing public spending efficiency by implementing measures such as improving procurement processes.
Monetary Policy: The primary focus is to uphold macroeconomic stability and allow for a more flexible exchange rate regime to absorb external shocks. Additionally, there are plans to further deregulate the domestic financial market, potentially welcoming foreign banks.
Business Environment: Initiatives are underway to streamline bureaucracy, simplify regulations, and enhance the overall business climate in order to attract investments and promote growth in the private sector.
Sector-Specific Policies: Various policies tailored to specific sectors have been delineated, including:
Encouraging exploration and investment in the mining industry to tap into additional mineral resources.
Improving border infrastructure, logistics, and trade facilitation to stimulate exports and reduce import costs.
Advancing the liberalization of the electricity sector to attract investments in power generation, enhance supply reliability, and pave the way for future energy exports.
Revamping agriculture to enhance resilience and productivity through the adoption of technology, better veterinary services, and liberalized trade in agricultural products.
Fostering a year-round tourism sector by showcasing Mongolia as a destination, upgrading infrastructure, and simplifying visa requirements.
Enhancing Quality of Life:
Addressing traffic congestion in Ulaanbaatar by enhancing infrastructure and advocating for public transportation.
Combatting air pollution by encouraging the use of cleaner fuels and transitioning from coal to alternative heating sources in the ger districts.
Revamping social welfare programs to effectively support vulnerable groups and enhance poverty reduction efforts.
Fostering human capital development through educational and healthcare reforms, with a focus on improving access to quality services and aligning training with the demands of the job market.
Key Statistics of Mongolia:
GDP Growth (2024): 5.6%
GDP Growth (2025): 8%
Inflation (2024): 6% (upper target range)
Inflation (2025): 6%
Foreign Trade Turnover (2024): 28.5 billion USD
Foreign Trade Turnover (2025): 32.8 billion USD
Livestock Loss (First half 2024): 8.1 million heads (vs. 4.9 million heads in all of 2023)
Copper Price (forecast 2024): 9,500 USD/tonne
Copper Price (forecast 2025): 10,000 USD/tonne
Coking Coal prices:
2024: 250 USD/tonne
2025: 215 USD/tonne
Brent Crude Oil:
2024: 85 USD/barrel
2025: 80 USD/barrel
In 2025, Mongolia's economy is expected to thrive due to robust mining activities and government policies that promote diversification and enhance living standards. Despite the promising outlook, achieving this growth hinges on effectively managing various risks such as maintaining energy security, addressing climate change challenges, and mitigating potential external shocks.
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