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BCM NOVEMBER 2022 MONTHLY MEETING RECAP
"The Business Council of Mongolia (BCM) held its regular Monthly Meeting on 23 November 2022 at the Shangri-La conference hall on the topic of “Mongolia Economic Outlook 2023.” Around over one hundred guests and members participated.
In his opening remarks, BCM Chair Ts.Tumentsogt noted that the economic growth is forecasted to reach 5.0% in 2023. The two main external factors affecting Mongolia at the moment are China’s Zero-Covid Policy and Russia’s war in Ukraine.
The meeting featured four presentation by experts on the topics of: monetary policy, balance of payments, 2023 state budget, and mining-dependent economic volatility.
Director of Monetary Policy at the Bank of Mongolia Mr. B.Bayardavaa informed attendees that global demand outlook continues to decline due to global uncertainty, high inflation risk, and tightening of monetary policy by most central banks.
Economic volatility based on the cyclical nature of the global mining industry has been a constant issue in recent history. A stability fund that saves revenue during price spikes can mitigate such fluctuations. Foreign investment and project management is key to saving the country's economy, said N.Enkhbayar from the Institute of Strategic Studies. Supply chain issues also persist, and cost of business is increasing, especially regarding transportation and inventory. Inflation in Mongolia was 14.5% in October, but that figure is expected to decline in the coming months. GDP grew by 3.7% in the first three quarters, and aggregate production and demand have reached pre-pandemic levels; however, the mining industry remains below pre-pandemic levels due to border restrictions.
The price of imported goods now account for 53% of inflation, whereas it used to be 30% before the pandemic. Exports of key products have not yet recovered to pre-pandemic levels. Balance of payments has swung into a deficit of 1.4 billion USD as of September 2022, the highest BoP deficit since 2014. Real household income has fallen, with people dipping more and more into their savings to plug the gap in consumption needs. Savings has been declining as a result.
The 2023 state budget is an austerity budget, with around 1.0 trillion MNT in spending slashed. Notorious spending on statues and other unnecessary expenditures have been cut, stated G.Zolboo, Director-General of the Financial and Fiscal Research Department of the Ministry of Finance. No new investments will be made from the 2023 budget. Of the 7.9 trillion MNT planned for over 1,100 projects, 2.9 trillion MNT is allocated for 2023, and around four-fifths of these projects are expected to be commissioned in 2023. The government is also reformed the tax system to have a progressive income tax system with brackets at 10%, 15%, and 20%. Only 1.3% percent of taxpayers will see an increase in their income taxes.
Economic volatility based on the cyclical nature of the global mining industry has been a constant issue in recent history. A stability fund that saves revenue during price spikes can mitigate such fluctuations, said N.Enkhbayar from the Institute of Strategic Studies.
After the informative presentations, a panel discussion was held moderated by B.Dulguun, CEO of the New Recovery Policy Accelerator. On the panel were:
- N.Enkhbayar, Managing Director Of The Economic Security Research Centre, Institute of Strategic Studies
- B.Munkh-Erdene, Head Of Balance of Payments Department, Ministry of Economic Development
- Ts.Tumentsogt, Chair of the BCM
- G.Zolboo, Director General of Financial and Fiscal Research Department, Ministry of Finance
Panelists discussed issues such as sovereign debt repayment obligations coming in 2023, recent wave of partial IPOs, reform of state-owned enterprise, attracting new investments, and safeguarding current investments.
Photos from the meeting and networking event can be found from the BCM's Facebook page. Follow the BCM to receive updates and info.
More information can be found from the Editor's notes and presentations linked below.
Links:
- Editor's notes (English)
- "Economic Outlook" (English) - by B.Bayardavaa, Director General, Monetary Policy Department, Bank of Mongolia
- “Current state of the economy, 2023 projections, and policy direction” (Mongolian) - by B.Munkh-Erdene, Head of Balance of Payments Department, Ministry of Economic Development
- “Unified State Budget of Mongolia 2023” (Mongolian) - by G.Zolboo, Director General of Financial and Fiscal Research Department, Ministry of Finance
- "Mongolian economic growth, FDI, and financing sources” (Mongolian) - by N.Enkhbayar, Managing Director of Economic Security Research Centre, Institute of Strategic Studies
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