Mongolia's economy is set to expand by 5.3% in 2024 and 6.5% in 2025, as reported in the World Bank’s latest semi-annual Mongolia Economic Update. The growth is attributed to robust mining production and strong domestic demand.
In the first half of 2024, economic growth maintained a steady pace at 5.7% year-on-year. This momentum has continued into the third quarter, driven primarily by sustained increases in mining and transportation services. However, the agriculture sector faced contraction due to harsh climate conditions. Domestic demand has been a significant growth driver but has led to pressure on the balance of payments with imports surpassing revenues from commodity exports.
Looking ahead, medium-term growth is expected to remain positive at around 6.0% over 2026–2027. Following a surge in output from the Oyu Tolgoi gold and copper mine in 2025, mining output is projected to moderate with other sectors such as trade, services, and agriculture taking a larger role in driving growth. Increased public consumption and investments under the government's four-year action plan are also anticipated to boost growth.
The report outlines several downside risks that could impact this outlook. Higher-than-expected fiscal spending may increase inflationary pressures and widen fiscal deficits. Climate change poses risks of natural disasters affecting the economy, particularly for poor households. Additionally, slower global growth could weaken external demand and reduce export commodity prices while geopolitical tensions might raise fuel prices, leading to higher imported inflation and production costs.
"While Mongolia's ongoing mineral export boom is delivering positive macro-fiscal outcomes for the second consecutive year, maintaining these gains will require prudent macroeconomic management," said World Bank Country Manager for Mongolia Taehyun Lee. "The continued reliance on mining leaves Mongolia vulnerable to external shocks and structural reforms to diversify the economy and increase its resilience remain important."
The report also examines Mongolia's fiscal system's distributional effects on poverty and inequality through taxes and social spending assessments. It finds that while effective in reducing poverty and income inequality, reliance on broad-based programs makes it costly. Recommendations include prioritizing reforms for a more progressive personal income tax system and reallocating funds toward cost-effective poverty-targeting programs.