INTRODUCTION TO THE CURRENT POLITICAL AND SOCIO-ECONOMIC SITUATION IN MONGOLIA
/As of May 2023/
The Government of Mongolia, led by Prime Minister Oyun-Erdene Luvsannamsrai has set out five main priorities which include 1) overcoming the pandemic within a short period of time, 2) reviving the economy, 3) creating a nationwide system that supports the middle class, 4) ensuring justice, and 5) promoting e-governance.
In September 2021, Prime Minister L.Oyun-Erdene proposed the New Recovery Policy to the Mongolian Parliament, and it was approved in December 2021. The three main objectives of the New Recovery Policy are: 1) quickly overcoming the economic difficulties caused by the pandemic, 2) promptly addressing obstacles to development and expanding the economic base, 3) the effective implementation of Vision 2050.
The New Recovery Policy consists of six pillars designed to address key economic constraints: i) border ports, ii) energy, iii) industrialization, iv) urban and rural development, v) green development, vi) state efficiency. The Government of Mongolia expects to see per capita national income double under the New Recovery Policy over 10 years, a maintained average of 6% growth in the long term, and labor force participation of up to 65%.
Mongolia’s GDP growth was at 5.2% in 2019, but shrank by 5.3% in 2020, but increased by 1.6%, 4.8% in 2021, and 2022.
According to the World Bank, Mongolia’s GDP expected to grow by 5.3% in 2023 and 6.4% in 2024[1]. In its latest flagship economic report, ADB Outlook April 2023, ADB projects Mongolia’s economic growth to expand to 5.4% in 2023 compared to 4.8% growth in 2022, before climbing to 6.1% in 2024[2].
In 2022, by preliminary estimation of production approach, GDP at current prices was MNT 52.9 trillion, which is increased by MNT 9.3 trillion (21.4%) compared to the previous year. GDP at 2015 constant prices was MNT 28.4 trillion, which is increased by MNT 1.3 trillion (4.8%) compared to the previous year[3].
In 2022, by expenditure approach, GDP at current prices was MNT 53.5 trillion, increased by MNT 8.8 trillion (19.7%) compared to the previous year. By expenditure approach, GDP at 2015 constant prices in 2022 was MNT 28.3 trillion and increased by MNT 1.3 trillion (4.7%) compared to the previous year[4].
According to the preliminary results by the National Statistics Office of Mongolia in 2022, the total revenue of the general government budget was MNT 18.6 trillion, which increased by MNT 4.3 (30.0%) trillion compared to the previous year. The equilibrated revenue of the general government budget was MNT 17.2 trillion, which increased by MNT 4.5 (35.3%) trillion compared to the previous year.
In 2022, by preliminary results, the current account of the balance of payment was in deficit of USD 2.9 billion and increased by USD 767.3 (36.4%) million compared to the previous year[5].
In 2022, the gross external debt of Mongolia reached USD 33.6 billion, which decreased by USD 219.6 (0.6%) million compared to the previous year, while increasing by USD 1.1 (3.5%) billion compared to the previous quarter. The gross external debt consists of USD 12.1 (36.2%) billion of direct investment (intercompany lending), USD 9.7 (28.9%) billion of other sectors’ external debt, USD 8.0 (23.8%) billion of the general government external debt, USD 2.2 (6.5%) billion as central bank’s external debt, and USD 1.6 (4.6%) billion of deposit-taking corporations’ external debt (the Bank of Mongolia excluded)[6].
In 2022, Mongolia traded with 160 countries, and the total foreign trade turnover reached USD 21.2 billion, of which exports were USD 12.5 billion and imports were USD 8.7 billion. The total foreign trade turnover increased by USD 5.2 (32.1%) billion, where exports increased by USD 3.3 (35.7%) billion and imports increased by USD 1.9 (27.2%) billion compared to the same period of the previous year.
The foreign trade balance was in surplus of USD 3.8 billion in 2022 and increased by USD 1.4 (60.1%) billion compared to the same period of the previous year. Trade balance was in surplus of USD 562.6 million, increased by USD152.4 (37.1%) million from previous month. Trade with China reached USD 13.7 billion in 2022, which is accounting 64.3% of the total trade turnover.
In the first 4 months of 2023, Mongolia traded with 134 countries, and the total foreign trade turnover reached USD 7.7 billion, of which exports were USD 5.1 billion and imports were USD 2.7 billion. The total foreign trade turnover increased by USD 2.6 billion (50.5%), where exports increased by USD 2.3 billion (81.8%) and imports increased by USD 310.5 million (13.2%) compared to the same period of the previous year. In April 2023, exports decreased by USD 198.7 million (13.1%) and imports decreased by USD 20.2 million (2.7%) compared to the previous month.
The foreign trade balance was in surplus of USD 2.4 billion in the first 4 months of 2023 and increased by USD 2.0 billion (5.4 times more) compared to the same period of the previous year. In April 2023, trade balance was in surplus of USD 597.7 million, decreased by USD 178.5 million (23.0%) from previous month.
Trade with China reached USD 5.7 billion in the first 4 months of 2023, which is accounting 74.2% of the total trade turnover. Bituminous coal and copper concentrates accounted for 64.0% and 17.9% of total exports to China, respectively, gold accounted for 99.9% of total export to Switzerland[7].
In the first 4 months of 2023, 71.7% of the total imports from Russia were petroleum products, 66.9% of the total imports from Japan were cars and 10.5% of the total imports from China were trucks[8].
The annual rate of inflation declined to 11.3% in April from 12.2% in March of 2023.
Taking into consideration the current state of the economy and financial markets as well as outlook for the domestic and foreign economic environment, the Monetary Policy Committee of the Bank of Mongolia decided to increase the policy rate by 2.5 percentage points to 9.0% in March 2022.
During its scheduled meetings on December 15-16, 2022, the Monetary Policy Committee of the Bank of Mongolia decided to raise the policy rate by 1 percentage point to 13%. In March 2023, the Monetary Policy Committee of the Bank of Mongolia decided to: 1.Keep the policy interest rate at 13%; 2.Narrow the policy rate corridor to be set as 1 percentage points above and below the policy rate and; 3.Exclude certain bank liabilities with maturities of at least 360 days and more that are newly funded on international markets in the form of bonds or loans from required reserve liabilities.
In May 2023, Fitch Ratings has affirmed Mongolia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.
As of September 2021, the total foreign direct investment registered in Mongolia was USD 1.2 billion which is 2.5 times lower than the pre-pandemic investment. Almost 80% of total FDI registered in the first three quarters of 2021 was made in the mining and extraction industry. In the first eight months of 2022, Mongolia attracted USD 800 million of foreign direct investment[9].
In 2022, the number of tourists was 286.3 thousand and increased by 253.2 (8.6 times) thousand from the same period of the previous year. In 2022, the number of tourists from Russian Federation increased by 140 637 (12.2 times), tourists from South Korea increased by 51 070 (23.1 times), tourists from the Kazakhstan increased by 16 828 (24.1 times) and tourists from China increased by 5 423 (1.9 times) compared with the same period of the previous year.
At the national level, 71.1 million livestock had counted in the livestock census at the end of 2022, which increased by 3.8 million (5.6%) from the previous year, hereof 4.8 million horses, 5.5 million cattle, 470.5 thousand camels, 32.7 million sheep, and 27.6 million goats counted.
In February 2023, the Government of Mongolia declared 2023 as the “Year to Combat Corruption”. In connection with this declaration, the Cabinet members, chairs of the Implementing Agencies of the Government, governors of aimags and capital city were tasked to ensure and thoroughly support the implementation of operations and measures taken for combating corruption. The Government of Mongolia will lead the national commitment to combat corruption and strive to eradicate corruption through its five key operations. Five “W” Operations to Combat Corruption: 1.Whistleblowing Operation, 2.Wiping-out Operation, 3.Wasp Operation, 4.Wealth operation, 5.Wide-Open Operation.
The National Climate Committee, led by Deputy Prime Minister of Mongolia S. Amarsaikhan convened on March 14. At the meeting the National Climate Committee discussed and approved the strategic and action plans for implementing the “One Billion Trees” national campaign in 2022-2030 and the action plan of the National Committee in 2023. In the strategic and action plans for implementing the “One Billion Tree” national campaign, 27 actions and 154 measures are planned to be implemented. Through over one billion trees plantation in the country by 2030 it is expected that the area affected by desertification and land degradation to be reduced by 4.0%, and carbon dioxide absorption by the tree to be increased by 11.0%, in addition to expansion of forest area. Furthermore, it is effective in mitigating climate change, accelerating green recovery, increasing the cultivation of herbs, creating jobs, and having a positive impact on the food supply.
In the framework of the national campaign “One Billion Trees”, more than 12 million trees have been planted throughout the country within the last year, and the seed reserves increased by 4.5 times compared to the previous years. A total of 320 domestic entities have contributed to planting these trees.
[1] https://thedocs.worldbank.org/en/doc/a8c4ec75eacd95208fbe44ab4785485e-0070012022/original/MEU-2022-April-MN.pdf
[2] https://www.adb.org/outlook
[3] Статистикийн нэгдсэн мэдээллийн сан www.1212.mn
[4] Статистикийн нэгдсэн мэдээллийн сан www.1212.mn
[5] Статистикийн нэгдсэн мэдээллийн сан www.1212.mn
[6] Статистикийн нэгдсэн мэдээллийн сан www.1212.mn
[7] Статистикийн нэгдсэн мэдээллийн сан www.1212.mn
[8] Статистикийн нэгдсэн мэдээллийн сан www.1212.mn
[9] Монголбанкны статистик мэдээлэл /ЭЗХЯ/
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