Following Mongolia’s 2024 parliamentary elections, the newly formed coalition government faces the formidable challenge of sustaining economic growth while navigating global economic uncertainties. With a solid export performance and an expansionary fiscal policy fueling optimism, structural vulnerabilities in agriculture, energy, and logistics threaten to test the country’s resilience.
Mongolia’s economy continued its post-pandemic recovery in 2024, though at a more modest pace compared to previous years. The country recorded a 4.9% GDP growth rate, significantly lower than the 7.4% growth in 2023 and the 18-year average of 6.4%.
The industrial sector expanded by 5%, with mining—a key driver of the Mongolian economy—growing by 5.7%. The increase in mining activity, particularly in copper and coal exports, helped sustain the economy amid external uncertainties.
However, agriculture suffered a major setback due to harsh winter and spring weather conditions, known locally as the ‘Dzud.’ The extreme cold and heavy snowfall led to the loss of 8.1 million livestock, 12.5% of the country’s total herd, causing a 25% contraction in the agricultural sector in the first three quarters of 2024. The decline in livestock numbers has also raised concerns about rural incomes and food security, which could have broader social and economic implications.
Mongolia’s trade sector saw record-breaking figures in 2024. Total exports rose by 3.9% to reach $15.8 billion, while imports surged by 25.5%, reaching a historic high of $11.6 billion. This increase in imports, largely driven by rising demand for machinery, fuel, and construction materials, signals growing domestic investment but also raises concerns about Mongolia’s trade balance.
Copper exports played a major role in boosting revenues. The volume of copper exports reached a record 1.7 million tons, an 11.1% increase from the previous year. Additionally, the average border price of copper rose by $236 per ton, driving a 26% increase in the total value of copper exports.
Coal exports also saw record-breaking volumes, rising by over 20% to 83.7 million tons, but declining coal prices offset some of the gains. A $25.4 per ton drop in coal prices led to a 2.3% decline in coal export revenues. This highlights Mongolia’s vulnerability to price fluctuations in global commodity markets, especially given its dependence on China as the primary buyer of its mineral resources.
Economic growth in 2024 was largely driven by demand-side expansion. The government capitalized on favorable commodity market conditions to increase budget revenue and grants by 28.7% from 2023, reaching 31.4 trillion Mongolian togrog ($9.1 billion)—a historic high. Simultaneously, budget expenditures grew by 34.9%, reaching 30.4 trillion Mongolian togrog ($8.8 billion).
Private consumption and investment also saw strong growth, rising by 27.8% and 26.8%, respectively, in the first three quarters of 2024. While this expansion has stimulated the economy, there are growing concerns about inflationary pressures.
Inflation averaged 6.6% in 2024, staying within the central bank’s target range, but rising wage demands, higher energy costs, and expanding government spending could push inflation higher in 2025. The economy is also under strain from energy, transport, and logistics constraints, which could further drive up costs.
The labor market continued to show signs of recovery. The labor force participation rate increased to 63% in the third quarter of 2024, reflecting a steady improvement. However, the unemployment rate also rose to 6.1%, signaling that job creation has not kept pace with labor force growth. The decline in agricultural employment due to the Dzud is likely a contributing factor.
Mongolia’s foreign exchange reserves reached a record high of $5.5 billion, marking a significant milestone for the country’s financial stability. This achievement is particularly notable given that the Bank of Mongolia successfully made $1.1 billion in foreign debt payments.
The Mongolian togrog remained relatively stable against the US dollar in 2024, reflecting improved investor confidence and prudent monetary policy. Mongolia’s sovereign bond spread also fell to 2.3%, the lowest in history, indicating reduced borrowing costs for the government.
The government’s 2023–25 debt management strategy restricts new foreign securities issuance to refinancing existing debt, a move aimed at maintaining fiscal discipline. The country’s improving economic indicators prompted S&P Global and Fitch Ratings to upgrade Mongolia’s credit rating to B+ and B2, respectively—the highest in a decade.
One of the most significant policy developments of 2024 was the long-awaited adoption of the Law on the Sovereign Wealth Fund. The fund consists of three sub-funds designed to:
- Accumulate national wealth from mining revenues,
- Finance large state investments, and
- Support social programs.
Additionally, the government introduced a zero-deficit budget for 2025, signaling its commitment to fiscal responsibility. However, amendments to the Fiscal Stability Law removed the upper limit on the overall budget deficit, replacing it with a lower limit on the primary balance surplus. The long-term impact of this change remains uncertain and could pose risks to fiscal stability.
Mongolia’s 2024 parliamentary elections introduced significant political changes. The new 126-member parliament was elected through a mixed electoral system, with five political parties winning seats. The election resulted in a historic level of female participation, with women making up 25% of the new parliament.
While the Mongolian People’s Party (MPP) won the majority, it formed a coalition government with the Democratic Party and the HUN Party, creating a 94% supermajority. This broad coalition could facilitate decisive governance but also raises concerns about limited opposition oversight.
The coalition government has outlined 14 major economic projects for the next four years, including:
- Expanding railway connectivity with China, which could increase coal export revenue by 2.8 times,
- Developing uranium mining projects in partnership with French energy firm Orano.
These large-scale projects are expected to boost long-term growth, but their success will depend on effective implementation and stable global demand.
Despite Mongolia’s progress, significant challenges loom for 2025.
- Disruptions in petroleum supply from Russia – Mongolia imports most of its fuel from Russia, and geopolitical tensions could impact supply chains.
- A slowdown in China’s economy – As Mongolia’s largest trading partner, any economic downturn in China could reduce demand for Mongolian exports.
- Expanding budget expenditures – Increased government spending, if not managed properly, could fuel inflation and debt concerns.
- Wage increases and rising energy costs – Higher wages and surges in electricity and heating prices could pressure businesses and households.
- The ongoing impact of the Dzud – The agricultural sector will likely continue to struggle, affecting rural communities and overall economic stability.
Mongolia’s new government has ambitious plans to drive economic growth through infrastructure expansion, industrial diversification, and fiscal management. However, global uncertainties, commodity price fluctuations, and internal structural weaknesses pose major risks.
To sustain growth and ensure long-term economic stability, policymakers must balance fiscal expansion with inflation control, diversify the economy beyond mining, and enhance resilience in agriculture and energy sectors. The success of these efforts will determine Mongolia’s ability to navigate an increasingly volatile global economic landscape.
As Mongolia embarks on this new political and economic chapter, strong leadership and prudent policymaking will be crucial in sustaining its progress and protecting its economy from external shocks.
