Mongolia’s growth will average 5.6% in 2020-2021, says World Bank
The World Bank keeps positive medium-term economic outlook for Mongolia despite heightened uncertainties...
The World Bank keeps positive mediumterm economic outlook for Mongolia despite heightened uncertainties. According to the World Bank’s February 2020 Mongolia Economic Update, robust growth in private consumption and continued steady investment in mining and manufacturing will support growth from 2020 to 2021, increasing it to an average of 5.6 percent. The World Bank expects the government to remain committed to fiscal consolidation to contain public debt in the medium term by improving revenue mobilization and rationalizing public expenditure.
Noting that Mongolia’s economy is starting to slow from its brisk pace of recent years, the international financial institution reported that economic growth strengthened to 7.2 percent in 2018 from 5.3 percent in 2017 amid impressive fiscal outcomes, better coordination of macroeconomic policy, favorable global commodity prices, and a strong recovery in private investment. However, growth for 2019 is estimated to be around 5.8 percent following the gradual decline in commodity prices and reflecting lower gold and copper grades.
“Despite the positive medium-term outlook, strengthening fiscal buffers through continued fiscal consolidation and building up reserves by limiting excessive foreign exchange interventions should remain two important policy priorities of the government,” said World Bank Country Manager for Mongolia Andrei Mikhnev. “The government’s commitment to reforms in 2020 will be crucial to maintain promising market sentiment and the flow of foreign direct investment.”
The World Bank warned that heightened uncertainties in the global and domestic environments could cause significant downside risks to the growth outlook. It mentioned that the major risks include political uncertainty due to the 2020 election, uncertainty about the recent US-China trade deal and its potential impact on commodity prices, and limited progress on recapitalization of the banking sector and antimoney laundering issues.
In addition, given strong trade and investment links with China, the growth outlook is likely to be adversely affected by the impact of the novel coronavirus on the Chinese economy.
A special section of the report looks at credit development in Mongolia’s banking sector, including updates on recent developments, an evaluation of the government response to key issues, and policy recommendations.
“Strengthening financial sector stability, especially with regard to credit policy and the soundness of the banking sector, will contribute to greater macroeconomic stability, job creation, and poverty reduction,” said World Bank Senior Economist for Mongolia Jean Pascal Nganou. “While monetary policy tightening since late 2018 has helped contain credit growth, further macro-prudential measures will help preempt emerging risks. Mongolia should continue its ongoing efforts to strengthen financial supervision and its macro-prudential framework, and bolster its crisis management and resolution frameworks.”