Is economic growth out of the question this year?

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Economists say that last year was “burdensome” both financially and economically. For instance, economist G.Batzorig explains that the pandemic and the Russia-Ukraine war contributed to the current bottlenecks but since the opening of the border, the tugrug and the country’s policy rate have strengthened. In general, he pointed out that the profits of enterprises have decreased, the salaries of citizens have not raised significantly and inflation has not gone below 15 percent. Even the government reported that the post-pandemic economic crisis continued last year, causing stagflation in the economy. But it is crucial to consider whether these economic difficulties will continue or improve this year. Therefore, let’s take a look at how the state of our country’s economy has been projected for 2023.

The government announced that it will follow the policy of growing the economy by 5 percent and keeping inflation at a single digit or about 8 percent. In particular, Minister of Economy and Development Ch.Khurelbaatar informed last October, “In 2023, mining exports are expected to reach pre-pandemic levels. Next year, a total of 500 kilometers of railway will be built in the direction of China. The government will also take measures to improve the economy. Prices will continue to rise in neighboring countries, which will affect our imports. In 2023, we expect economic growth to be 5 percent. The price of raw materials is estimated to be higher next year than in 2022.”

The Russia-Ukraine war, the global economic growth crisis, the vulnerability of the financial sector, difficulties in energy supply, transportation and logistics, and natural and weather risks may affect Mongolia’s economy, as predicted by the government.

The government decided to implement the following policy measures to positively impact the economy in 2023:

• To ensure macroeconomic stability

• To bring the volume of exports to pre-pandemic levels

• To make the sale of mining products and the activities of state-owned companies transparent

• To advance the processing level of mining and agricultural products

• To implement liberalization in sectors that restrict economic development

• To support the private sector and business activities

• To increase funding sources and diversification

• To improve port, transport and logistics operations

• To stabilize the economy in the second half of 2023

Meanwhile, the European Bank for Reconstruction and Development expects exports to reach pre-pandemic levels in 2023, with economic growth reaching 7 percent. However, the bank’s Resident Representative Hannes Takacs warned, “The 2023 state budget depends on the projection of mineral exports. If exports do not reach the target level, the budget deficit will increase from the estimated amount. Mongol Bank is expected to continue its strict monetary policy, which will increase the cost of financing for businesses.”


Economists and experts have shared their views and positions on the state of the economy this year. Specifically, financier G.Batjargal wrote an article about Mongolia’s financial and economic prospects for 2023.

He believes that in 2023, there will be no sharp fluctuations in the economy. The financier explains that this year’s state budget doesn’t include things that would significantly advance the economy, further boost export output or reduce dependence on mining. This year, the minister of culture has been given a larger budget than the energy minister and a number of welfare and constructions have been planned ahead of the 2024 elections.

G.Batjargal predicted that the policy interest rate will remain at the current level of 13 percent until March and may decrease by 1 to 2 percentage points later on. “I see that the policy of reducing inflation and reducing money supply is ineffective. If these policies were effective, the amount of central bank securities would increase. Moreover, banks do not have enough resources to provide loans. They will pay more attention to loan repayments and give priority to lending to their ‘good’ customers with slow repayments,” he underscored.

“Within the framework of the ‘coal theft allegations’, coal exports and income have increased in recent months and official foreign exchange reserves have reached 3.3 billion USD. Also, border and customs issues are relatively stable due to the border opening of the southern neighbor. This has had a positive effect on the inflow of foreign currency. However, in terms of outflows, we need to pay a total of 1.1 billion USD for the Gerege bond in May this year and the foreign bonds of Development Bank in October. We will not be able to pay directly from our foreign exchange reserves, so we will have to refinance them. International interest rates have all risen. International credit rating is the most important for our country, which finances its budget with debt. However, there is no reason to improve the rating with the current budget policy.”

But not all hope is lost. Currency inflows are expected to surge due to the opening of the Oyu Tolgoi underground mine in the middle of the year. Therefore, unless there are major political and economic commitments and border customs issues, the change in the MNT-USD exchange rate is expected to be between 4 percent and 5 percent, according to financier G.Batjargal.

He continued, “Inflation will probably be reduced slowly. Also, it can be seen in the statements of the International Financial Institutions and Mongol Bank that there is no possibility of a high percentage reduction. In particular, the price of meat is relatively low this year, but inflation is not decreasing. Mongol Bank proposed to transfer funds for the mortgage program to the government, but it was not included in this year’s state budget. I see that it is a good thing that alternative financial instruments other than savings and loans or bank-dominated markets are attracting more people’s interest and increasing accessibility in the last two years. In specific, fintech services, asset-backed securities, bonds on the OTC market and closedеend and open-ended investment funds are reaching market participants. This is the result of the improved regulatory environment of the Financial Regulatory Commission, better access to investment for professional organizations and the cooperation of financial experts. In 2023, the financial market, excluding the banking sector, will expand. Unless there are major external and domestic shocks, the GDP will probably grow by 3 to 4 percent.”

In accordance with the amended law, tax revenue is projected to hike thanks to the new tiered tax system. Particularly, G.Batjargal mentioned that traders and service providers who earn income from personal accounts will start paying tax on their profits if they can prove their expenses and if they can’t, they will start paying taxes on their income. The tax authorities have already started collecting their bank account information from financial institutions, he said.


This year’s budget envisages economic growth at 5 percent, export revenue at 11 billion USD, fiscal revenue at 19.5 trillion MNT and fiscal deficit at 1.5 trillion MNT, which economist N.Enkhbayar describes it as “a very optimistic projection”.

Highlighting that in October 2021, the main international banking and financial institutions in Mongolia such as the Asian Development Bank, the World Bank and the International Monetary Fund (IMF) made new predictions about the current state of the world economy and its outlook, he underlined, “These forecasts were significantly lower than the projections made at the beginning of 2022. They expected global economic growth to be around 3 to 3.6 percent last year and around 4 percent in 2023. When the economic growth of developed countries slows down, the capital spent on construction works decreases and the demand for steel, iron and metals goes down. Thus, in the context of reduced demand for metals, China’s steel production will slow down and as a result, the demand for imported iron ore and coking coal is likely to decline.”

“In the case of the interruption in export income and budget income, it will be impossible to pay off the planned expenses on time. Due to this, we will face the choice of either making a budget amendment and cutting income and expenditure, or increasing the budget deficit. If the export income in the first half of the year drops compared to this year, negative phenomena such as decreased foreign currency income, heightened balance of payments deficit and lowered foreign currency reserves are likely to occur. If such a situation occurs, there is a risk that the growth of the foreign exchange rate, which is still growing rapidly, and the growth of inflation will intensify. Unfortunately, as the external environment remains unfavorable, the aforementioned risks are becoming more and more real.”

Mongolia’s foreign debt due in 2023 is high and the annual interest payments on foreign loans and bonds are also snowballing year by year. The cost of new bonds issued by developing countries will be high due to global economic slowdown, higher rates set by the central banks of developed countries and high risks in the international financial market, where the US dollar is getting stronger, N.Enkhbayar emphasized.

Even Mongolia doesn’t fully pay its foreign debt and plans to extend the term by replacing it with new bonds, when there is a risk of the interest rate of newly issued bonds being incredibly high. As a result, by the end of 2023, Mongolia’s total foreign debt is likely to increase, according to the economist. He advises changing the macroeconomic policy of the country, which is dependent on the export of raw materials. Both the IMF and the World Bank have repeatedly warned the government about this. In addition to fluctuations in the prices of raw materials and external debt pressure, the loss of the pension fund is expected to rise in the coming years. If we do not correct these macroeconomic and fiscal policy mistakes without delay, there is a risk that the debt burden will become unmanageable in the future, N.Enkhbayar warned.


The economy is expected to grow by 4 percent this year, but this is not enough, economist G.Batzorig commented. The mining sector will have a significant impact on this. Looking at international economic outlooks, the economic growth of the three major countries will decelerate, which will affect their regional growth, he said.

“The remaining balance of offtake contracts of Erdenes Tavan Tolgoi is estimated to be 600 million USD. According to estimates, this should be paid in two years. I think the amount due in 2023 is about 300 million or 400 million USD. This is equivalent to 10 percent of our foreign exchange reserves. In addition, our country has to make two bond repayments. Therefore, 2023 is expected to be a difficult year with low economic growth, high inflation and low foreign exchange reserves. It is estimated that prices will increase in double digits. Because the prices of meat, milk and flour, which make up 30 to 40 percent of inflation, are constantly changing depending on the season. We also import wheat seeds from Russia. In addition, it is doubtful that fuel prices will be stable.”

The economist stressed, “The welfare policy continues. The government ‘supports’ inefficient budget spending and imports. We are fighting against inflation only by tightening the monetary policy. In other words, our country is following an uncoordinated fiscal policy. Its victims are enterprises and citizens. In the last three years, the prices of 10 main products have increased by 120 percent, while wages have increased by 50 percent. In other words, the purchasing power of citizens has decreased by 50 percent.”

Misheel Lkhasuren