Mongolia Economic Forecast

Economic growth accelerated to 7.8% year on year in Q1 from 7.3% in Q4. The reading was driven by a more than doubling of exports, amid recovering tourism and stronger commodities trade with neighbor China—the latter tied to the reopening of China’s economy and new railway lines linking Mongolia to the Asian powerhouse. In addition, government consumption growth picked up steam. In contrast, fixed investment and private consumption contracted. Turning to Q2, available signs are fairly positive, with the industrial sector continuing to benefit from improved access to China: Production of coal, oil, copper and silver rose sharply in annual terms in April. The start of underground production at the Oyu Tolgoi copper mine in mid-March will provide a further boost to industry and exports ahead.

Inflation dropped to 11.3% in April from 12.2% in March, above the Central Bank’s 4.0–8.0% target range. In March, the Central Bank left the policy rate at 13.00%, after doubling the rate over the prior 12 months. Inflation is seen dipping this year but will average in double digits, boosted by strong economic growth, a recovery in tourist arrivals and January’s minimum wage hike.