B.Lkhagvasuren: The economy is expected to grow by 3% this year

Mongol Bank has presented the draft basic guidelines for 2023 state monetary policy.

Governor of Mongol Bank B.Lkhagvasuren noted, “Unfavorable conditions of the external environment have directly and indirectly affected Mongolia and for the past two years, our economic activity has been at a weak level. In 2020, Mongolia’s economy shrank but in 2021, it grew by 1.9 percent. Post-pandemic recovery has been observed in sectors other than mining, transportation and construction. We regularly exchange information with the National Statistics Office.”

“As of October, Mongolia’s economy is growing at 3.3 percent. If this trend is not lost until the end of the year, there is a chance that the economy will see annual growth of 3 percent. If exports continue to recover in the future, the economy is expected to grow by 3 percent this year and 4 to 5 percent next year.”

It is estimated that 60 to 70 percent of our country’s total input is generated by transportation and foreign prices and their direct and indirect effects. In 2023, Mongol Bank aims to bring the inflation rate to a single digit and stabilize it.

He added, “Since the beginning of the year, the net inflow of foreign currency has decreased and the outflow has remained high. So, for Mongolia, it cannot get income from exports at the level it used to before the COVID-19 pandemic broke out around the globe. Although the prices of raw materials are high, we cannot export as much as we want. On the other hand, imports are increasing. In the first half of 2022, imports grew by about 40 percent. In the last third quarter, it reached 25 percent. Due to this, there is pressure on the trade balance.”

According to B.Lkhagvasuren, along with the tight monetary policy on currency inflow and outflow, which is a reflection of the balance of payments, assets in the banking system have gone down and credit growth continues to be suppressed. Loans grew by about 25 percent in the first quarter of this year but decreased to a growth of 10 percent in the third quarter. If this trend continues, it is estimated that there will be no credit growth in 2022.

“The real sector, or the private sector, is financed by bank loans. However, the absence of credit sources and the cessation of financing means limited business opportunities for private enterprises. Therefore, Mongol Bank is focusing on not causing credit interruptions. In this sense, policy solutions will be released soon,” the central bank’s governor concluded.