In this article, we present a translation of the Bank of Mongolia President’s interview, offering an overview of the economic outlook for 2025.

⚔️ Government Programs: A Double-Edged Sword

The government’s targeted soft loan program, which starts during the COVID era, provides ₮10 billion in 2020 to preserve jobs. Initiatives like the “Food Revolution” and the “New Cooperative” program issue $1.2 billion and over ₮660 billion in loans, respectively, to stimulate growth. The upcoming “White Gold” program focuses on industries processing agricultural raw materials, continuing the government's economic push. Additionally, the government allocates ₮200-₮300 billion annually on interest subsidies for these programs.

• While these loans total ₮2 trillion, a fraction of the ₮35 trillion in total loans, they raise long-term concerns. Concessional loans, offered at favorable terms, help businesses in the short term but disrupt market norms. The BOM President warns that businesses struggle to transition to non-concessional financing later, risking long-term financial instability.

🧮 Current Account

Mongolia’s current account balance in 2023 shows a strong surplus, driven by high global commodity prices, particularly coal and copper. This surplus stabilizes the MNT and strengthens foreign exchange reserves, acting as a buffer against external shocks.

For 2024, the BOM expects a more moderate surplus of around $150 million. While export volumes remain steady, imports, especially in consumer goods like automobiles and luxury items, grow by 26%, putting pressure on the balance of payments. This shift from a 6% rise in exports signals potential challenges ahead.

🔜 2025: A Tough Road Ahead

Looking toward 2025, the BOM President foresees increasing challenges in maintaining a stable current account. Several key factors contribute to this outlook:

• Commodity Price Volatility: Coal prices drop to $70-$80 per ton by the end of 2024 and do not recover significantly. While copper production from the Oyu Tolgoi mine shows promise, Mongolia’s reliance on these two commodities leaves the country vulnerable to global market fluctuations.
• Rising Imports: The persistent growth in imports, particularly in consumer goods, continues to pressure the trade balance. Without measures to stimulate domestic production, this trend narrows the current account surplus further.
• Need for Diversification: The BOM President stresses the importance of diversifying Mongolia's export base beyond raw materials. Expanding the manufacturing sector and developing value-added industries ensure long-term economic resilience.

While Mongolia navigates 2023 with a strong current account surplus and maintains a moderate surplus in 2024, the outlook for 2025 presents significant challenges. The Bank of Mongolia remains focused on maintaining macroeconomic stability through prudent policy adjustments and strategic economic diversification. Balancing the risks of government programs, commodity price volatility, and rising imports is key to Mongolia’s ability to weather the storm and secure a sustainable economic future.