The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Mongolia on Thursday, September 14, 2023, considered and endorsed the staff appraisal without a meeting.

Growth rebounded to 5.0 percent in 2022 and the external position stabilized as a result of China’s reopening, the government’s determined efforts to boost exports, and private sector financing inflows. After peaking in mid-2022, headline inflation gradually declined to 10.6 percent in June 2023 largely reflecting falling global prices. Core inflation also started to moderate. In light of the improving economic situation, a supplementary budget for 2023, passed in June 2023, introduced large and permanent increases in wages, benefits, and pensions. Strong mining sector activity and the fiscal expansion are expected to help sustain robust growth in 2023.

The procyclical fiscal expansion is expected to boost growth initially. However, with unchanged fiscal policies, inflation is expected to rise and remain above the target range set by the Bank of Mongolia (BOM) over the medium term, and external pressures could re‑emerge. These factors are likely to weigh on the non-mining sector and growth outlook from 2024 onwards. Without consolidation measures, the overall fiscal balance is expected to deteriorate from a surplus in 2022 to a large deficit by 2024, placing public debt on an upward trend, and posing a risk to Mongolia’s economic stabilization.

The risks surrounding the baseline outlook are tilted to the downside. Mongolia’s high external debt, limited external buffers, and dependance on imports and commodity exports makes it vulnerable to external shocks. Additional policy slippages before the June 2024 Parliamentary elections could pose further risks to macroeconomic stability, as could lower than targeted coal exports.

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