By D.KHUSLEN
We spoke with Z.Munkh-Orgil, Senior Economics Officer at the Asian Development Bank (ADB). ADB recently published the Asian Development Outlook September 2025 report, which provides economic growth analysis in developing Asia. She shared her insights on Mongolia’s economic outlook with us.
ADB projects Mongolia’s economy to grow by 5.7 percent in 2025-2026, driven by mining, copper concentrate production, and a recovery in agriculture. However, would these sectors be able to deliver long-term sustainable growth? What is your view based on updates to the Asian Development Outlook to reflect the current situation?
Mongolia’s economic growth forecast for 2025-2026 has been revised down to 5.7 percent. This reflects two main factors: a slowdown in the mining sector, particularly due to challenges in the commodity market—most notably coal—and lower than expected consumption and public investment following recent government spending cuts. Despite these headwinds, there are positive developments. The agricultural sector is showing signs of recovery following losses caused by zud, and production at the Oyu Tolgoi underground mine is ramping up quickly, contributing to economic growth. However, Mongolia’s key sectors—mining and agriculture—remain vulnerable to climate risks and commodity price fluctuations. To ensure long-term sustainable growth, Mongolia must strengthen its resilience to external shocks and develop buffers that can help the economy withstand adverse conditions.
The price of copper a record 10,600 USD per ton this year. Last year alone, Oyu Tolgoi exported 1.1 million tons of copper concentrates while Erdenet Mining Corporation exported 690,000 tons. However, Mongolia remains heavily reliant on commodity exports, particularly coal, and it poses a concerning risk to economic slowdown. What policies are needed to reduce this dependence?
Commodities make up more than 90 percent of Mongolia’s exports, with coal and copper accounting for over 70 percent of the total. This heavy reliance highlights the urgent need to broaden and diversify the country’s economic base. Vertical diversification—adding value to raw commodities through processing—and horizontal diversification—expanding into agriculture, tourism, and digital services—are essential. Additionally, increased investment in education and manufacturing will be crucial. At the same time, it is essential to uphold robust policy frameworks, including building fiscal reserves in boom years, adhering to countercyclical fiscal rules, ensuring stable budget revenues, and using stabilization funds to cushion volatility. Aligning national development strategies with global efforts to reduce carbon emissions and tailoring educational programs to support emerging industries are also key steps toward sustainable and inclusive growth.
Inflation is projected to rise to 8.6 percent this year, before easing to 7.2 percent next year. Some economists caution that these forecasts may be too optimistic.
Inflation this year is exceeding the central bank’s target, primarily due to the lingering effects of tariff increases on energy and public transportation. Additionally, the sharp depreciation of the tugrug earlier in the year has raised the cost of imported goods, further intensifying inflationary pressures. However, as tariff effects fade and tighter monetary policy takes full hold, inflation is expected to gradually return to the central bank’s target range.
Domestic factors, including rising energy prices and fiscal expansion, are currently driving inflation. What short-term policy measures could be effective in addressing these pressures?
Although electricity tariff hikes have contributed to short-term inflationary pressures, this measure was a necessary step to increase investment in the energy sector and ensure the reliability of services. On the fiscal front, recent budget reductions—including the 2025 supplementary budget cut amounting to 2.1 percent of GDP and proposed spending limits for 2026—are expected to have a moderating impact on inflation. Policy-wise, beyond the application of monetary measures, it is crucial to address supply-side shocks to stabilize inflation near the target range. Notably, prices of domestic food products, such as meat and vegetables, continue to experience significant volatility driven by supply fluctuations.
Economic growth in the developing Asia-Pacific region is expected to slow to 4.5 percent next year. What impact could this have on Mongolia’s economy and export markets?
In addition to ongoing external uncertainties, the full impact of tariffs imposed by the United States is expected to be felt next year. Consequently, economic growth in the developing Asia-Pacific region, which stood at 5.1 percent in 2024, is projected to slow to 4.8 percent in 2025 and further to 4.5 percent in 2026. The regional economic outlook continues to face several risks, including the possibility of additional trade tariffs, capital market volatility, escalating geopolitical tensions, and a prolonged slowdown in the PRC’s real estate sector. For Mongolia, this increasingly challenging global environment is likely to affect its economy primarily through the PRC market outlook.
Rising US tariffs and international trade uncertainty pose risks to regional markets. How would this affect foreign trade and investment in our country?
Mongolia’s direct trade with the United States represents 1.1 percent of total exports and 2.8 percent of overall foreign direct investment, indicating that the immediate impact of US-imposed tariffs on the Mongolian economy is relatively small.
Nevertheless, developments in PRC’s market—especially the introduction of higher tariffs and other restrictions on steel exports—are likely to indirectly influence demand for Mongolia’s key mineral exports, such as coking coal and iron ore. For instance, the United States has imposed a 50-percent tariff on Chinese steel exports, and other countries, including Japan and India, began enacting similar trade restrictions.
Is there a chance that the slowdown in China’s growth poses a risk to Mongolia’s economic outlook?
ADB forecasts PRC’s economic growth at 4.7 percent this year and 4.3 percent next year, slightly lower than the government’s five percent target. Despite the introduction of various policy measures aimed at stimulating the economy, growth in China may decelerate due to a combination of external and internal challenges, such as subdued consumer spending and a downturn in the real estate sector. Given Mongolia’s strong economic linkages with PRC’s market, particularly in the mining sector, there is a significant risk that this slowdown could adversely affect Mongolian mining exports. However, Mongolia can potentially mitigate these negative effects by preserving its competitive advantage in product quality and cost relative to other commodity suppliers to the PRC.
What recommendations does ADB have in this regard?
Mongolia’s abundant natural resources are a key driver of the national income. Given the global shift toward decarbonization, it is increasingly vital for Mongolia to diversify its export portfolio. Simultaneously, the PRC, a large and continuously expanding market, presents significant trade and economic opportunities for neighboring countries, including Mongolia.
Critical minerals like copper, lithium, cobalt, and rare earth are crucial for clean energy technologies including solar panels, electric vehicles, and battery storage systems. Demand for these minerals is increasing due to the global trends in energy transition and digitalization. ADB has developed a 2025–2029 strategy for critical minerals value chains. Under this strategy, ADB is committed to support its developing member countries in leveraging their mineral resources to promote inclusive growth, foster energy transition, and support climate resilient industries. In the case of Mongolia, copper and other critical mineral resources could be leveraged to diversify its current coal-heavy export structure. ADB can assist by supporting the development of investment policies in these areas, completion of environmental, social, and governance assessments, and facilitating investor participation through transaction advisory services. We believe that Mongolia has the potential to become a key player in the global clean energy supply chain.
ADB forecasts that increased copper production will have a positive impact on economic growth. However, is sustainable economic growth based solely on the mining sector a concern?
Mongolia’s reliance on the mining sector makes its exports and budget revenues highly susceptible to external economic shocks and fluctuations in global commodity markets, which in turn complicates efforts to maintain stable economic growth. The recent decline in coal prices during the first quarter of this year clearly illustrates this vulnerability. Although increasing copper production does not fundamentally reduce Mongolia’s overall dependence on mining, it can help cushion the economy against the swings in the coal market.
To foster sustainable growth and enhance productivity, active participation and investment from the private sector are essential. Long-term improvements in economic productivity will largely depend on technological innovation, the development of human capital, and robust infrastructure—all of which require efforts from both government and private stakeholders. In addition to fostering a favorable business environment and enacting effective tax policies, it is essential to invest in infrastructure that ensures reliable supply chains and supports exports. Such investments are vital for encouraging private sector activity and driving diversified economic growth.
So macro policies are crucial?
To achieve diversified, inclusive, and sustainable growth—and to reduce reliance on the mining sector—strong macroeconomic and fiscal management are essential. Equally important is enhancing and strengthening the business and investment climate, as the private sector serves as the primary driver of economic growth. Supporting private sector expansion, market development, financial inclusion, and capacity building will be key to fostering long-term prosperity. Additionally, increasing investment in the transport sector can help lower transportation and logistics costs while stimulating rural development. ADB remains committed to partnering with both the public and private sectors in Mongolia to advance diversified and inclusive growth in these critical areas.
The dollar continues to strengthen against the tugrug. With inflation high and pressure on the tugrug, tight monetary policy risks dampening economic growth. What institutional arrangements would be optimal to strike this balance?
Mongolia’s continued external imbalance and current account deficit are contributing factors to the weakening of the domestic currency, becoming one of the factors to increasing inflation. In response to the increasing inflationary pressure, the central bank tightened monetary policy at the beginning of this year. However, supporting economic growth should be primarily managed through a countercyclical fiscal policy. Mongolia’s debt sustainability has improved since the pandemic, with a budget surplus and increased budget stabilization fund accumulation demonstrating fiscal discipline. With respect to budget spending, it is essential to restrain the growth of current expenditures that fuel consumption—particularly those that increase import demand—and instead establish a resilient and adaptable fiscal framework by prioritizing forward-looking investments.
Despite the high economic growth projection, there is criticism that poverty and income inequality persist. What policies and directions does ADB consider important in this regard?
Statistics indicate that poverty reduction stagnated in recent years due to high inflation, as well as the impact of the pandemic and the zud disaster. In particular, the poverty rate in rural areas persists and remains higher than the national average. ADB has recently approved the Country Partnership Strategy for Mongolia for 2025-2028. The strategy identifies priorities for promoting inclusive and diversified growth, strengthening sustainability and resilience, and enhancing capacity and opportunities.
Within the framework of this strategy, a series of activities are planned to support inclusive growth. For instance, ADB will support the government in implementing an investment program aimed at improving urban infrastructure in rural areas and enhancing productivity in the livestock sector. Projects are also being developed to expand energy supply and improve service reliability. In addition, we are working with the government to implement projects such as modernizing general hospitals in provincial centers to improve the quality and access to healthcare in rural areas and supporting youth employment by strengthening the vocational education and training system.
