Mongolia’s Achilles Tendon (Part Two), April 2014

Even though the data from NSO shows that the trade deficit in the first quarter has improved quite significantly, we maintain our cautious stance on the outlook of the Mongolian Economy.

That is based on the conviction that current expansionary monetary policy by BOM is not sustainable. We urge BOM to take tightening stance as early as possible to avoid the hard landing scenario.

After looking at the most updated economic forecast of Mongolia done by World Bank, ADB and IMF, we have confirmed that the economic slowdown is more eminent in Mongolia. However, their main scenario on outlook of Mongolia is still high with around 7-10% GDP forecast in the next three years. But, if you look at more details, they are based on the scenario that the Government will take right measures to cool down the economy. However, if the Government will continue to follow current expansionary policy, they are more skeptical about the economy especially after 2015. They are particularly concerned about stimulus measures taken by BOM, strong BOP pressure driven by weak FDI and current account deficit and weak governance of politically important decisions like OT.

We believe this situation is not sustainable. And, some measures should be taken ASAP.

This report summarizes the view from foreign donors and investors and possible measures taken by the Government.

Download full PDF report from the following link:

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