Mongolian Macroeconomic

Environment
Tuvshintugs Batdelger
June 2015

Economic Overview: Growing, but

volatile
MONGOLIA: country
profile

Source: World Development Indicators, World

Bank, ADB

2 995 949

Labor force:

1 870 206

Area (km2):

1 564 115

Neighbor
countries:

China and
Russia

HDI

0.675(108th
)

Source: 2014 NSO, Mongolia

Average Growth Rate between 1997-2014 was 7%

Population:

Nominal GDP per capita has increased 8.5 fold

between 1997-2014
2

Economic Overview: Promising in the

long-term

Source: World Development Indicators, World Bank

Source: SES, NUM and BAEconomics Pty,

2011

Economy more than triples by 2020 with average growth of 14.8%.

(SES, NUM and BAEconomics, 2011)

Mongolia will be the fastest growing economy in the world between

2010-2030 with average growth rate 9.7% (Citigroup Global
Markets, 2011)
3

Contributors to GDP: mining as a

main driver

Economy is highly reliant on the mining sector

Policies remain the same

Source: SES, NUM and BAEconomics Pty, 2011

International agencies have negative

outlook for Mongolian economy
Year

2013

2014

2015

Macroecomic
Indicators

IM
F

World
Bank

A
D
B

S
&
P

Mood
y

Fitc
h

IMF

World
Bank

AD
B

S&P

Mood
y

Fitc
h

IM
F

World
Bank

ADB

S&P

Mood
y

Fitch

GDP growth
(%)

11.7

11.7

11.6

11.7

11.2

9.1

9.5

10

11.2

4.4

2.9

Inflation (%)

8.6

12.3

9.7

15.8

13.2

13.5

10

9.2

8.9

10

-27.7

-27.5

-14.1

-16.5

-12.5

-8.5

-11.1

-8.8

-8

-8.5

B+

B2

B+

BB-

B2

B+

Current
Account
/GDP(%)

Ratings

-27.4 -26.5

Source: Various open sources

Three main challenges

1.

Balance of Payment

2.

Fiscal Balance

3.

Institutional Quality

Balance of Payment:
Although foreign capital accumulation
increases, FDI falls

Source:External sector statistics, Bank of Mongolia

Opportunity in the Mining sector

attracted FDI
Graph

Source: Invest Mongolia

Agency

share of mining sector in FDI

FDI by
Sectors
1990 2013

Why significant drop in FDI?

External Factors:
Decline in commodity prices
China economic slowdown

Sudden, unstable and unpredictable policies:

SEFIL enacted and then cancellation: government role in mining sector
2nd Phase of the Oyu Tolgoi: Re-negotiation
State Policy on Railway is in 6th year
Tavan Tolgoi negotiation
Establishment of DBM, but problems with governance
South Gobis license is revoked
No development policy or consensus on development policy

Balance positively effects on Fiscal

Balance

In 2008, trade balance index was 106 % , export and import price indexes
were 202 % and 159.2 % respectively.

In 2015, trade balance has been positive for the first three months due to
increase in export of copper concentrate and decline in import of machine nary,
equipments.
1
0

:
Source:
NSO

2. The shortage of Central Government

Budget revenue leads to budget deficits
In 2014, the shortage of
Central
Government Budget Revenue
reached 1 trillion MNT

The main reason of this

shortage is an overly optimistic
budget planning.

80.4% in 2014.

11

Central Government Budget

Deficit
Central
Budget
Balance

Budget balance has not

recovered
since 2011.
(Chinggis and Samurai
bonds are
included in calculation)

12

Government

3. Institutional quality poses a risk in the

long- term

Institutional Quality Indicators by World Bank:

CPIA=3

Risk

Source: Bloomberg

Questionable commitment to the Fiscal Stability Law

13

Thank you for your attention!