Mongolia’s economy would grow 11 to 12percent in 2012 but still faced major challenges, the World Bank.
World Bank (WB) Country Manager to Mongolia Coralie Gevers said the main growth sectors were construction, agriculture and communications and it was positive agriculture had finally recovered from the dzud (extremely cold and heavy snow weather).
However, Gevers warned, although the economy was still growing, it was slowing. The country recorded 17.3 percent growth in 2011
She said industrial production had not been expanding as fast as before, with the mining sector contracting 6 percent in August compared to the previous year. The decline was also reflected in GDP growth from July to the end of September, which registered a 6.5 growth.
“There is a positive factor that inflation is also slowing at the same time; however, it is still in double digits,” Gevers said. “In August, inflation was 15 percent for Mongolia and 15.6 percent for the capital city Ulan Bator, which is still quite high.”
She said, as long as the county had high fiscal spending, it would have high inflation.
The manager also expressed concern over the foreign trade situation. Mongolia’s exports had been falling, particularly coal exports to China, she said, adding exports were falling faster than imports, which was leading to a widening trade deficit for Mongolia.
“This has also led to a depreciation of the tugrik. The Bank of Mongolia (the country’s central bank) has been trying to manage this depreciation and smooth it out,” Gevers said.
It had been using its reserves to intervene in international foreign exchange markets to buy tugrik and sell dollars, which led to the reserves’ decline, she said.
Global demand for minerals was declining, due to the slowing world economy, Gevers said, and Mongolia was particularly at risk due to its heavy dependence on commodities exports, which accounted for nearly 90 percent of its total exports.
However, she said the country had advantages in tackling the challenges and realize steady economic growth, including its open economic system and good geographical location next to East Asia, one of the world’s fastest growing regions.
She said, if Mongolia managed its economy well, it had the potential to realize great economic achievements.
Mongolia’s economy grew 10.2 percent in the first three quarters of 2012 compared with the same period last year.