World Bank lowers GDP growth projection

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        The World Bank held a presentation for its estimation for East Asia and Pacific (EAP) countries and showed the GDP growth forecast for Mongolia, which was lowered by 0.1 percent from April projections. World Bank also lowered the economic growth projection for 2024 to 6.1 percent.

The report stated that Mongolia, by the end of 2022, had exceeded pre-pandemic levels of output. The outlook for consumption in China is also subject to downside risks. Mongolia is especially exposed to China as a destination for exports of construction materials. Impact on annualized GDP growth in 2024 from a consumption slowdown in China to Mongolia has about negative 0.3 percent. In addition, impact on annualized GDP growth next year from weaker residential investment in China to Mongolia is around negative 0.15 percent.

Increased government spending in the last decade was not matched by higher revenues and government spending as a share of GDP in EAP countries has, on average, been increasing. The interest payment burden has been increasing across the region as interest rates rise and is significant in Mongolia.

Policy priorities differ across EAP economies. In Mongolia, governance of banks and independence of the Mongol bank need to be strengthened as supervision transitions from a compliance-based to a risk-based approach.

As for regional outlook, the World Bank dropped its outlook for developing economies in EAP next year, because of slow economy in China. The bank expects 2024 regional GDP growth as 4.5 percent, compared to the 4.8 percent in April. The bank also mentioned that improving external conditions can lead to 4.7 percent without China next year. If China continues to face persistent domestic difficulties, it will affect the regional outlook, limiting its growth to 4.4 percent in 2024. They also said that potential risks such as international tensions and natural disasters, can further worsen the regional economic situation.

Amarjargal Munkhbat