【世界银行】蒙古经济更新，2024年11月：保持收益-特别关注：蒙古财政制度的分配影响-2024_39页_11mb

Mongolia Economic Update: Sustaining the Gains

Core Content

Mongolia's economy has experienced significant growth since 2023, primarily driven by mineral production, particularly coal, which has elevated the country to upper-middle-income status (UMIC) in 2024. This growth has been supported by increased domestic demand and strong export revenues, especially to China. However, the economy faces challenges related to balance of payments pressures, inflationary risks, and vulnerability to external shocks due to its heavy reliance on mining.

Main Economic Developments

• Economic Growth: Real GDP growth remained robust in 2024, reaching 5.7 percent year-on-year (y-o-y), with mining and transport services being the main contributors. The agriculture sector, however, contracted sharply due to the dzud (severe winter disaster), with livestock losses reaching 8.1 million head, or 12.5 percent of the national herd.
• Domestic Demand: Increased domestic demand was a key growth driver, with private consumption growing by 16.9 percent y-o-y and public consumption rising by 46.9 percent y-o-y. Public investment also increased significantly, contributing to overall economic expansion.
• Inflation: Headline inflation fell to 6.7 percent by September 2024, within the Bank of Mongolia (BOM) target range (6±2 percent), prompting the BOM to cut the policy rate by 300 basis points. Inflationary pressures, however, are expected to rise again in 2025, reaching 8.0 percent.
• Fiscal Performance: Despite high spending, the government maintained a budget surplus of 3.1 percent of GDP in the first nine months of 2024. The surplus helped reduce the public debt-to-GDP ratio to 38.2 percent by mid-2024.
• Current Account Deficit: The current account balance shifted to a deficit due to a soaring import bill, driven by strong domestic demand. The deficit reached 5.6 percent of GDP by September 2024, compared to a surplus of 2.1 percent in the same period in 2023.

Outlook and Risks

• Growth Projections: Economic growth is expected to accelerate in 2025, reaching 6.5 percent, supported by increased production from the Oyu Tolgoi (OT) mine and a modest recovery in agriculture. However, rising imports may temper this growth.
• Inflation and Fiscal Deficits: Inflation is projected to rise to 8.0 percent in 2025, and a moderate fiscal deficit is expected for the next two years (0.8 percent of GDP on average).
• Current Account Deficits: Robust domestic demand and declining commodity prices are expected to widen current account deficits to an average of 7.0 percent of GDP in 2024-2025.
• Downside Risks: Potential risks include excessive fiscal spending, climate change leading to more frequent natural disasters, and slower global growth affecting export demand and prices.

Distributional Impacts of the Fiscal System

• Poverty and Inequality: The fiscal system has had a marginal effect on poverty reduction but has shown strong broad-based redistributive effects.
• Direct Transfers: Direct transfers have been more effective in reducing poverty and inequality compared to taxes, which have only marginal redistributive effects.
• Fiscal Reforms: The report recommends:
  • Revenue reforms to enhance redistributive effects.
  • Allocating revenue to more cost-effective and poverty-targeting transfer programs.
  • Establishing a comprehensive reform strategy that balances short-term poverty reduction with long-term investments in human capital, infrastructure, and institutions.

Key Policy Recommendations

• Strengthen Fiscal Sustainability: Gradually reduce pandemic-era social assistance while making it more progressive and responsive.
• Reform Subsidies: Reform subsidies in energy, agriculture, and pensions to improve efficiency.
• Reduce Fiscal Risks: Address contingent liabilities and phase out quasi-fiscal activities such as the subsidized mortgage program.
• Support Independent Monetary Policy: Enhance the central bank's independence and credibility by prohibiting certain forms of financing under its mandate.
• Enhance Poverty Reduction: Improve the effectiveness of the fiscal system in reducing poverty and inequality through targeted transfers and better resource allocation.

Conclusion

Mongolia's economic growth has been driven by mineral exports, particularly coal, but the country must balance this success with managing inflation, current account deficits, and fiscal sustainability. A focus on reforming the fiscal system to be more equitable and efficient is essential for long-term development and resilience against external shocks.