Press Release – AmCham Mongolia discussed an Economic Outlook of Post-Election Mongolia: DOES MONGOLIA HAVE AN ECONOMIC RECOVERY PLAN?
ULAANBAATAR, Mongolia – The American Chamber of Commerce in Mongolia (AmCham Mongolia) organized its June Online Monthly Meeting on Economic Outlook of Post-Election Mongolia. The panelists were Andrei Mikhnev, Country Manager of the World Bank, Ekhtuvshin D, Vice President of MCS Holding, Bilguun A, Board Member of the Mongolian National Mining Association, and Dr. Khashchuluun Ch, an Independent Economist.
The panel discussion was moderated by Jay Liotta, Chairman of AmCham Mongolia, and the Letterhead partner of Mahoney Liotta LLP. Around 70 attendees participated in the online discussion representing AmCham member companies, and domestic and international businesses.
In his opening remarks, Jay Liotta, asked How quickly Mongolia can recover from the impacts of COVID-19 on the Economy? Public health policies dominate the Economic recovery program, and while positive health impacts are wonderful, it can be devastating to an economic situation. Mongolia’s Economy has contracted by 10.7%. The nation’s payment balance showed a deficit of 665 million USD, deteriorating by almost one billion USD compared to a surplus of 322 million dollars the same period last year. Fitch credit ratings perceive that the Mongolia economy will rebound rapidly from the temporary shock of COVID-19 to a 7.9% GDP growth in 2021. It also reported that Mongolia’s credit ratings would remain “B,” and the outlook of the nation remains stable. Yet we have a trade deficit of 389.6 million USD. Major exports fell sharply due to border restrictions. Coal exports at the end of May were 2.6 times lower than 2019, and investors and lenders remain hesitant to put their time and capital into Mongolia as they will have to cover added risks and costs.
The foreign direct investment totaled 481.4 million USD, which is 20% lower than the same period last year. As of the first quarter of 2020, the Bank of Mongolia emphasized more than 90% of the foreign direct investment was related to the OT project. So how realistic is a quick recovery, and how much is within Mongolia’s power? Will the next parliament care about foreign direct investment and stand against state-owned businesses driving a state-planned economy?
Andrei Mikhnev, Country Manager of the World Bank, emphasized that the Covid-19 is a significant factor impacting the Economy in Mongolia, not so much the elections. June issue of the Global Economic Prospects, a semi-annual publication from the World Bank shows a -0.5% to -2.6% growth forecast for Mongolia. The situation will worsen if the newly elected parliament won’t take adequate measures to address declining exchange reserves in Mongolia, extensive intervention to support the national currency, management of public and private debt. Finally, Mongolia needs to closely monitor the key commodities and its prices to continue to enjoy the benefits of its vast natural resources and maintain the growth we have seen since 2017. The new government’s major challenge will be to build the private sector-led strong Economy that is transparent and encourages broader participation of businesses.
A. Bilguun highlighted the potential of growth in gold exploration due to recent discoveries of new deposits. The mineral sector has a competitive advantage in global and regional markets and should be treated as such.
D. Enkhtuvshin emphasized that the development of mega-projects becomes challenging once the government starts to get involved and that Mongolia needs to re-think the degree to which the government should partner with private businesses after the elections.
Finally, the discussion ended on a hopeful note from Dr. Khashchuluun Ch, who stressed that the advantage of a small, mobile economy is that Mongolia has the potential to rebound quickly in the second half of the year given the newly-elected government implements adequate measures. The new government’s top priority will be to develop the economic recovery plan.
Following the panel discussion, the panelists took part in the Q&A session and answered the virtual audience’s questions.
In conclusion, AmCham and the panelists urged for a carefully constructed multi-step economic recovery program from the government.
About AmCham Mongolia
AmCham Mongolia is an independent, membership-driven organization that seeks to build, strengthen, and protect business between the United States and Mongolia, and to promote Mongolia as a destination for American investment actively. AmCham Mongolia is the official local affiliate of the U.S. Chamber of Commerce, the largest business federation globally with over 3 million member companies. AmCham Mongolia is also a member of the Asia-Pacific Council of American Chambers of Commerce, consisting of 29 American Chambers of Commerce in the Asia-Pacific region.