ULAANBAATAR, MONGOLIA (22 September 2021) — Mongolia’s economic rebound continues in 2021, driven by strong recovery in the People’s Republic of China, robust export demand, and increased private outlays, says a new report by the Asian Development Bank (ADB).
In its Asian Development Outlook (ADO) 2021 Update, ADB projects Mongolia’s economic growth to rebound to 4.6% in 2021, slightly lower than the 4.8% forecast in April, before accelerating to 6.0% in 2022. The ADO is ADB’s flagship annual economic publication.
“Despite over 65% of the population becoming fully vaccinated, public health concerns and economic uncertainty remain high, and Mongolia has faced a significant challenge to mitigate COVID-19 risks to ensure sustainable economic recovery,” said ADB Country Director for Mongolia Pavit Ramachandran. “Continuing health responses, maintaining macroeconomic stability, ensuring accommodative policies, targeting social protection, and fostering investment climate reforms are top priorities for this economic recovery puzzle.”
Gross domestic product expanded by 7.1% in the first half of 2021 mainly because mining and services recovered. Contraction in the construction sector continued and agriculture contracted unexpectedly, mainly caused by increased COVID-19 infections and consequent lockdowns, which also turned the contribution of total consumption to negative growth. However, credit expansion recovered mostly for smaller enterprises, which supports positive contribution from investments.
Growth will accelerate in 2022 as COVID-19 concerns ease, benefits from the vaccination program materialize, transportation and logistics issues affecting exports are resolved, and domestic demand rises.
Annual inflation in the year to August 2021 reached 8.9%, mainly on increases in food, transportation, and dining services, while inflationary pressure is expected to continue through 2022. However, inflation forecasts remain unchanged as April forecasts factored in these rising costs and likely supply shocks.
Downside risks to the outlook include adverse implications of the new coronavirus variants and persistent border restrictions which disrupt exports, undermine industrial output, and keep inflation high by disrupting supplies of food and construction materials and raising transportation costs.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.