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Mongolia Country Risk Report Q4 2018

Mongolia Country Risk Report Q4 2018

The landslide victory of the Mongolian People's Party (MPP) in the parliamentary elections on June 29 2016 will usher in a period of relative political stability and improved policy coordination over the coming years. Meanwhile, Mongolia remains highly economically dependent on China, and we expect relations between the two countries to advance over the coming years, which will likely benefit the landlocked nation's trade and investment amid greater cooperation.

Mongolia is progressing well on its nascent recovery, which began in 2017, and we expect economic growth to head higher over the coming quarters. Growth will likely be boosted by robust investment activity, helped by an accommodative monetary policy, while commodity export growth recovers.

We still expect the Mongolian Togrog (MNT) to face depreciatory pressures due to narrowing real interest rate differentials relative to the US, which will be mainly driven by rising inflation in Mongolia.

Mongolia's public finances have started to improve in 2017, following a significant deterioration in 2016, and they are likely to get better over the coming years. The MPP-led government aims to contain spending while increasing revenue by raising personal income taxes.Major Forecast Changes

We have raised our 2018 real GDP growth forecast to 6.0% (from 5.5% previously).

We have revised our 2018 average forecast to MNT2,445/USD (from MNT2,420/USD previously) to reflect our expectations for further weakness.

Key Risks

Upside Risk: An aggressive ramp-up of major mining projects such as the second phase expansion of the Oyu Tolgoi project and the Tavan Tolgoi coal mine would help galvanise investment activity significantly. Downside Risk: In a worst-case scenario, a significant slowdown in Chinese economic growth and, by extension, demand for commodity imports would seriously hamper Mongolia's growth prospects. Any deterioration in the country's business environment due to delays in other major mining projects and the failure to rein in its fiscal deficit could weaken investor confidence, which could force the Bank of Mongolia to hike rates unexpectedly (to the detriment of the banking sector), in order to shore up the currency.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
Mongolia's Growth Outlook To Be Supported By Mining Investment
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: MAIN EXPORT AND IMPORT PARTNERS
TABLE: MAIN EXPORTS AND IMPORTS
TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
TABLE: FISCAL AND PUBLIC DEBT FORECASTS
Currency Forecast
Mongolian Togrog To Remain On A Weakening Trajectory
TABLE: CURRENCY FORECAST
Mongolia Country Risk Q4 2018Contents10-Year Forecast
Mongolian Economy To 2027
Fierce, But Volatile, Growth In Store
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Mongolia's Relations With India Set To Improve Further
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Transforming Minerals Into Wealth
Global Macro Outlook
Fewer Negative Surprises, But Trade Risks Rising
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: MONGOLIA – MACROECONOMIC DATA & FORECASTS

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