Parliamentary elections are scheduled to take place by June 2016, and Mongolia's political environment will be volatile ahead of the elections. The two major parties, namely the Democratic Party and the Mongolian People's Party, are unlikely to win a convincing mandate, and we expect a coalition government to be formed. This means that the business environment will remain challenging for investors.
Weak mining-related investment, subdued export demand due to a cooling Chinese economy, and a slowdown in the construction and real estate sectors will continue to act as headwinds to the Mongolian economy in 2015. The second phase expansion of the Oyu Tolgoi (OT) copper and gold mine is estimated to commence in the middle of 2016, and we expect real GDP growth to pick up over the coming years, averaging 7.5% over the next decade.
We remain bearish on the Mongolian togrog against the US dollar, and forecast the unit to average MNT1,975/USD in 2015 and MNT2,000/USD in 2016 owing to the country's weak economic fundamentals and technical picture. Notably, elevated inflation and a deteriorating terms of trade picture point towards further weakness in the Mongolian togrog. Mongolia's wide current account deficit suggests that the currency will remain highly volatile based on investors' perception of the country's macroeconomic prospects. However, the weakness will not be excessive as foreign capital return to the country owing to the second phase expansion of the OT copper and gold mine.
We forecast that the Bank of Mongolia (BoM) will cut its 1-week central bank bill by 100 basis points (bps) to 12.00% by the end of 2016, with the aim of supporting the country's sluggish economy. Falling headline consumer price inflation (CPI) due to shrinking money supply will provide scope for the central bank to ease its monetary policy stance over the coming months.
Mongolia will continue to run fiscal deficits in the coming years as structurally low commodity...
The Mongolia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Mongolia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.
An influential new analysis of Mongolia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI Research.
- Forecast the pace and stability of Mongolia's economic and industry growth through end-2019.
- Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
- Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
- Contextualise Mongolia's country risks against regional peers using BMI's country comparative Risk Index system.
- Evaluate external threats to doing business in Mongolia, including currency volatility, the commodity price boom and protectionist policies.
BMI provides our fully independent 5-year forecasts for Mongolia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.
Economic Outlook Contents
The Mongolia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.
Key Areas Covered:
- Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
- BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.
- Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
- Balance of Payments - trade and investment, current and capital account.
- Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
- Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
- Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
- Foreign Direct Investment - approvals, inflows and climate.
- External Debt - debt profile (short and long-term plus public and private sector obligations).
- Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.
- Rely upon BMI's 100% independent forecast scenarios for Mongolia and underlying assumptions - we take no advertising and are privately-owned.
- Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Mongolia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
- Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.
What are the political risks to doing business in Mongolia over the next 5-years?
BMI's Mongolia country Risk Index evaluates the short- and medium-term threats to political stability.
Political Outlook Contents
- SWOT Analysis for the Mongolia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Mongolia.
- Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Mongolia's risk are compared with regional and global averages.
- Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
- Long-Term Political Outlook BMI examines the structural risks to the stability of Mongolia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.
- Benchmark Mongolia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
- Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
- Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.
What are the current operational risks and difficulties associated with doing business in Mongolia?
The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Mongolia against its neighbours.
Operational Risk Contents
The chapter provides a summary of the main threats in the country, within:
- Labour Market Risk (Education; Availability of Labour; and Labour Costs)
- Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
- Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
- Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).