World Bank projects 6.6 % GDP growth for Mongolia in 2019
The World Bank projected 5.9 percent GDP growth in 2018 for Mongolia and despite a less favorable external environment, 6.6 percent growth in 2019 according to its latest economic report on the East Asia and Pacific region.
Robust growth in private consumption and private investment in mining and manufacturing is expected to drive 5.9 percent GDP growth in 2018 and is projected to continue to 6.6 percent GDP growth in 2019. Risks to the outlook cited in the report include political uncertainty, commodity shocks, border bottlenecks, and poor handling of money laundering issues.
“Mongolia’s real GDP grew by 6.3 percent in 2018 H1, supported by robust mineral exports, strong foreign direct investments, and improved business sentiments. The fiscal stance has continued to improve significantly, with a surplus of 2.8 percent of GDP in 2018 H1 from a deficit of 0.8 percent of GDP in the first half of last year. This is explained by a better than expected revenue performance from coal and copper exports, and a commitment to spending control, including reduction in interest payments, streamlining wage bill through hiring freeze, and rationalization of underperforming capital spending. Substantial improvement in fiscal balance ultimately led to a reduction in government debt in 2018 H1,” the report said.
The report points to a four-pronged approach for countries in developing East Asia to address these emerging risks:
Reduce short-term vulnerabilities and build policy buffers. Pursuing proactive macroprudential policies can help address financial sector vulnerabilities, reduce capital market volatility, and manage exposure to exchange rate movements. Greater exchange rate flexibility can help absorb and adapt to external shocks. Tighter fiscal policies can help preserve or rebuild buffers to cope with a future downturn, without threatening debt sustainability. Redouble commitment to an open, rules-based international trade and investment system, including through deeper regional economic integration. Regional economies could gain by deepening existing preferential trade agreements and lowering nontariff barriers. A further escalation of trade tensions could be avoided by turning to bilateral negotiations or the World Trade Organization.
Deepen structural reforms, including liberalizing key sectors, improving the business climate, and boosting competitiveness. Leveling the playing field between SMEs and large firms, and between foreign and domestic firms, could also help reduce resource misallocation and create jobs.
Strengthen economic security and promote economic mobility though programs such as targeted cash transfers, fiscally-sustainable social insurance systems, better access to prenatal and early childhood development, and more resources to schools in geographically-disadvantaged areas so as to reduce gaps in access and quality of education.
In the East Asian and Pacific region overall, the growth outlook remains positive despite a less favorable external environment. Growth in developing countries in the region is expected to be 6.3 percent in 2018, lower than in 2017 due to the continued moderation in China’s growth as its economy continues to rebalance.
Navigating Uncertainty, the October 2018 edition of the World Bank East Asia and Pacific Economic Update, underscores however that in recent months a combination of trade tensions, higher US interest rates, a stronger US dollar, and financial market volatility in many emerging economies has increased the uncertainty around the region’s growth outlook. At the same time, inflation has begun to rise across the region, particularly in Myanmar, the Philippines, and Vietnam.
“Robust growth has been and will continue to be the key to reducing poverty and vulnerability in the region,” said Victoria Kwakwa, World Bank vice president for East Asia and Pacific.
“Protectionism and turbulence in financial markets can hurt the prospects for medium-term growth, with the most adverse consequences for the poorest and most vulnerable. This is a time for policy makers across the region to remain vigilant and proactively enhance their countries’ preparedness and resilience.”
China is expected to slow moderately to 6.5 percent in 2018, after growing faster than anticipated in 2017. For smaller economies in the region including Cambodia, Lao PDR, Mongolia, and Myanmar, growth prospects remain robust, projected to average over six percent growth annually until 2020.
“The regional and global integration of most economies in the region intensifies their vulnerability to external shocks. The main risks to continued robust growth include an escalation in protectionism, heightened financial market turbulence, and their interaction with domestic fiscal and financial vulnerabilities,” said Sudhir Shetty, World Bank chief economist for the East Asia and Pacific region.
“In this context of rising risks, developing EAP economies need to utilize the full range of available macroeconomic, prudential, and structural policies to smooth external shocks and raise potential growth rates,” he added.