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02/23/2015

Mongolia Investment Outlook


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Mongolia is one of the world's fastest growing economies, with a year-on-year real growth rate of 7% in 2014. Recent growth has been primarily driven by development of new mining projects, growth in the real estate and agriculture sector, and an expansionary fiscal and monetary policy.

Mongolia's economy is highly dependent on trade with China. Economic growth has been negatively affected by a slowdown in the Chinese economy, which accounted for 94.1% of Mongolia's exports in 2013. In addition, Mongolia is dependent on Russia for all of its fuel and some of its energy needs, which makes Mongolia vulnerable to price pressure from Russia.



Asian Development Bank (source: ADB's Asian Development Outlook 2014) and IMF forecast that the Mongolian economy will grow 7.5% and 8.4% in 2015 respectively. ADB expects higher economic growth in the next few years due to the expected commencement of Oyu Tolgoi underground mining project in 2015, increased production of Tavan Tolgoi LLC and commencement of new railway and road operations. The consortium, formed by China's Shenhua
Energy Co. Ltd, the Mongolian Mining Corp., and Japan's Sumitomo Corp. is currently in negotiations with the Mongolian government to develop 7.4B ton Tavan Tolgoi coal project.

As of October 23, 2014, the Development Bank of Mongolia has allocated 3.38 trillion MNT using proceeds from Chinggis Bond (USD 1.5B), Samurai Bond (USD 290M) and Euro Bond (USD 580M) to provide loans to the following sectors (source: DBM):

Services: MNT 8.1B
Power plants: MNT 254.2B
Agriculture, light-manufacturing: MNT 269B
Construction: MNT 272.7B
Infrastructure: MNT 284.2B
Roads: MNT 1,077.7B
Mining: MNT 416.5B
Rail-Road: MNT 401B
Manufacturing: MNT 395.7B

Exchange rate fluctuated throughout 2014 from 1659.34 to 1888.44 MNT/USD (source: Bank of Mongolia). 

In 2014, PRC President Xi Jinping and Russian President Vladimir Putin made an official visit to Mongolia. During these visits the government representatives signed more than two dozen key trade, finance, infrastructure, energy, defense, agriculture, finance, and diplomatic cooperation agreements.  Both PRC and Russia pledged to boost trades with Mongolia to $10B each by 2020.

In 2014, Mongolia was selected to host the 2016 Asia-Europe Meeting (ASEM), which will be the largest diplomatic gathering in Mongolia's history with far-reaching benefits.

Learn more at NYSSA's 3rd Annual Investing in Mongolia Conference. Register here.

–Amarbayasgalan Enkhsaikhan, MBA, CEO, Golomt Securities LLC

REFERENCE

http://www.bloomberg.com/news/articles/2014-08-22/china-s-xi-upgrades-mongol
ia-relationship-as-trade-links-deepen

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