ULAANBAATAR, November 28, 2023 – Mongolia’s economy is projected to grow by 5.8 percent in 2023 and 6.2 percent in 2024 as the mining sector expands, private consumption recovers, and fiscal expansion stays strong, according to the World Bank’s latest semi-annual Mongolia Economic Update.
In the first half of 2023, Mongolia’s economy exhibited robust growth, primarily propelled by the mining sector. Early indicators suggest that this growth trend has persisted in the latter half of the year. Nevertheless, growth has been markedly uneven, with the non-mining sector trailing behind, underscoring the economy’s heavy reliance on the mining sector and its heightened exposure to mining sector cycles.
In the medium term, economic growth is expected to accelerate, averaging above 6 percent in 2025-2026, driven by a substantial increase in mineral production as Oyu Tolgoi’s 2023 mining production is anticipated to more than double by 2025.
Yet, significant downside risks persist. These risks encompass lower mineral exports prompted by slower-than-expected growth in China, as well as uncertainties on coal offtake agreements. Additional risks include inflationary pressures stemming from both further domestic fiscal expansion and heightened geopolitical tension in the Middle East, potentially resulting in higher oil prices.
An analytical chapter focuses on Mongolia’s trade opportunities in digital services, which could help diversify the country’s economy. Mongolia’s strongest opportunities to bolster its digital services growth and trade are in software development, telecommunications, and digital marketing. However, despite progress in telecommunications and internet penetration, considerable constraints remain in digital infrastructure, including slow network speeds, cybersecurity vulnerabilities, and a shortage of highly skilled professionals.
“While the ongoing surge in mining exports is bolstering macroeconomic conditions, the sustainability of these positive trends calls for continued reforms aimed at diversifying the Mongolian economy and enhancing its resilience to commodity price cycles,” said World Bank Country Manager for Mongolia Taehyun Lee.
The report emphasizes the need for fiscal moderation to mitigate inflationary pressures and enhance macroeconomic stability, thereby stimulating private sector investment and bolstering global market confidence. In addition, the report recommends improving social protection efficiency to safeguard household consumption without spurring inflationary pressures.
In the medium term, the report suggests rebuilding fiscal buffers to respond to shocks and create space for future investments, including under the New Recovery Policy. To promote economic diversification through digital services, the report advises enhancing digital infrastructure and establishing initiatives to upgrade digital skills.