Mongolia’s economy faces growing headwinds from a continued slump in the minerals market and heightened global financial volatility, according to the World Bank’s Mongolia Economic Brief for January.
“Slower global demand and weaker prices of major commodities are dampening growth and exports of mineral-rich economies including Mongolia,” said World Bank Senior Economist Taehyun Lee. “A sharp rise in Mongolia’s external borrowing costs in January reflects a tighter financing environment for emerging economies as well as elevated Mongolia-specific risks perceived by the international financial market.”
The report noted that the second phase development of the Oyu Tolgoi copper and gold mine would help support investment needed to reignite growth momentum against weakening external demand.
“Restoring sound macroeconomic management and attracting foreign investment remain essential for strengthening the resiliency of the economy in the face of global financial volatility,” said James Anderson, the World Bank Country Manager for Mongolia.
The report welcomed a proposal to transfer the Bank of Mongolia’s subsidized mortgage program to the government. According to the World Bank, the subsidized mortgage program now needs to be implemented through the government budget without further central bank financing, so that it competes with other spending priorities. The report also called for attention to the sustainability of the program considering its fiscal costs.