OUTLOOK 2021 Mongolia

OUTLOOK 2021 Mongolia
The Khentii Mountains in Terelj, close to the birthplace of Genghis Khan. / Vidor, CC, public domain.
By Anand Tumurtogoo in Ulaanbaatar January 25, 2021


2021 is the year Mongolia can make great strides in economic stability and growth, but that all depends on how the country's leaders address the domestic transmission of coronavirus (COVID-19) at the beginning of the year. And the year has started off rather badly on that score, with Prime Minister, Khurelsukh Ukhnaa on January 21 having his resignation and that of his cabinet accepted by parliament. This followed protests in the capital Ulaanbaatar over the government’s handling of the COVID-19 pandemic, specifically triggered by video footage of what some Mongolians saw as the inhumane treatment of a coronavirus patient and her newborn baby, who were transferred in the bitter cold to a specialist quarantine facility while the mother was still wearing her nightgown and slippers. 

Mongolia overall also started 2020 rather rockily. Like all nations around the world, its economy and politics were affected by the pandemic, although, unlike other nations, the country had no domestic transmission of COVID-19 until November, which helped the incumbent Mongolian People’s Party (MPP) to win the State Ikh Hural (parliamentary) election and retain a majority. For 2021, the current president, Khaltmaagiin Battulga, looks in a good position to retain the presidency in the upcoming election if he is allowed to run.

Mongolia’s GDP in 2020 looks like it will come in with at least a 3% to 5% contraction, but if Mongolia finds the means to administer the COVID-19 vaccine effectively and widely, it is very likely the country's economy will rebound quickly in 2021. The government has also announced it will write off utility fees under COVID-19 relief from December 1, 2020, to July 2021.

The funding for the utility write-off will come from Mongolia’s biggest and oldest copper mine, run by Erdenet Mining Corporation, which will pay the $228mn needed to cover the amount;  this means the government has confidence in the mining sector, which is the driving force behind the country's profits.

This can be seen in how coal exports picked up in 3Q20 y/y and was the main reason why Mongolia’s GDP didn’t go down further in 2020, and with the addition of faster transits and the deteriorating relationship between China and Australia, Mongolia could benefit significantly. Moreover, if the country could solve more logistical issues this would open more opportunities in 2021.

However, it should be noted that Mongolia’s government debt currently stands at around 70% of GDP. Mongolia has a limited timeframe to repay its significant bonds. And also with the advent of COVID-19, Mongolia’s tourism and cashmere industries will take some time to ramp up again, which means the country's economy will be more intertwined with the mining industry, which received a huge boost from global gold prices going up in crisis-hit 2020 and through China relying on Mongolian coal instead of Australian coal.



Possibly the biggest Mongolian political event in 2021 will be the presidential election. As of December 18, the Mongolian parliament had not amended the presidential election laws and, as a result, the 2019 constitutional amendment to restrict presidents to a one-term limit has taken effect and without a further amendment the current president of Mongolia, Battulga Khaltmaagiin, of the Democratic Party, cannot run in the poll. It is likely that the parliament will still amend the presidential election laws to give Battulga the right to run for a second term, with the constitutional amendment bringing in a one-term limit taking effect in 2025 instead.

2021 will see the ruling Mongolian People's Party (MPP) trying to dislodge Battulga from his position and obtain total dominance over the three executive branches. Battulga has actually started campaigning, even though Mongolia's election rules state that election campaigns are only allowed within the 28 days before the election. So Battulga is doing a workaround. He has used his power to discredit his likely opponents through the courts, with sentences handed out. Resigned MPP premier Khurelsukh Ukhnaa, meanwhile, has claimed Battulga was responsible for whipping up the protests that forced him to quit (see above). Mongolia’s president, as head of the National Security Council, has the power to dismiss judges and in 2019 Battulga appointed the prosecutor general and anti-corruption head, whom he then utilised to get at likely political opponents before the courts. Battulga will surely utilise that power to silence potential presidential candidates in 2021.

The MPP has floated the idea of former prime minister and current member of Parliament Batbold Sukhbaatar running as the MPP presidential candidate, but he is also likely to be called to court over fraud allegations centred on an Oyu Tolgoi mine procurement company. Battulga thus has a great chance of getting re-elected; the only person who of late had the same presence as Battulga is the resigned prime minister and MPP leader, Khurelsukh Ukhnaa.

If Battulga wins re-election, which certainly looks probable, he will try to consolidate more power in the courts and will put pressure on politicians and businesses to follow his whim. However, he is unlikely to expand his powers to the fullest extent, as parliament has the power to amend the constitution to curtail the powers of the presidency.

Apart from the MPP and Democratic Party, the two main parties competing in the presidential election, a third and rising party, the Labour Party, will have a chance of running a candidate. It is unlikely, however, Labour will get enough votes to attract even a fourth of the overall electorate. Nonetheless, the presidential election will be a chance for the new and up and coming, mainly highly educated, urban politicians to gain recognition throughout the country including rural areas, but they still need to get campaigning in the 21 provinces to bring on some momentum that will give them a chance of obtaining more seats in the 2024 parliamentary election, and with the deteriorating reputation of the Democratic Party, Labour has a real chance of unseating the second-biggest party in Mongolia. 

Whatever government takes shape following the resignation of the latest cabinet, its main focus will need to be to stimulate the economy as quickly as possible, so other policies that are more focused towards a cohesive society, such as gender equality policies, might not take priority in 2021.



Mongolia Key Economic Figures
















Nominal GDP (MNT tugrik bn)








Real GDP (% y/y)








Gross industrial output (% y/y)








Consumer Price Index (% y/y)








Government budget balance (MNT tugrik bn y/y)








Government debt (MNT tugrik bn)








Gross Foreign Debt ($ mn)








Source: Mongolian National Statistics Office.

The World Bank in January 2021 said it saw Mongolia’s economy shrinking 5.2% in 2020 and rebounding with 4.3% growth in 2021. The global pandemic is clearly the problem here; the majority of the lost growth is due to the mining sector having been unable to export mineral goods across the border at the beginning of the year. The state budget, thanks to the mining industry and export of coal to China for more than two years, had seen a net positive from 2018 to 2019, but in 2020 the budget experienced a sharp decline, as the government spent heavily ahead of the parliamentary and local elections, and the slowdown of coal exports to China from early 2020 has also hampered Mongolia’s fiscal growth. 

The World Bank and other international institutions worried that the biggest risk to Mongolia’s economy was the 2020 parliamentary elections, but the incumbent party took power again in June and since then many in the government have been actively ramping up the country's economy through infrastructure projects and mining. In August, Mongolia and China instituted the "green passage" scheme to fast-track freight cargo across the borders. This significantly boosted Mongolia, as did the deteriorating relationship between China and Australia, with China barring Australian goods, mainly coal, from entering the country. That gave Mongolia a significant advantage in the recovery of its economy in 3Q20, and these two factors will be significant forces that will help push Mongolia’s fiscal recovery in 2021. If Mongolia’s coal and mining sector plays its cards right and leverages the Australian-Chinese situation, Mongolia growth may be even higher than expected in 2021.

With the onset of the local transmission of COVID-19, the country saw, for a short while, a small haemorrhaging of the economy as local businesses shut down, and  Mongolia had to rely on the average 21 coal haulage trucks per day that went into China in late November 2020. Within days, however, the situation returned to a 2,000 trucks per day average. If Ulaanbaatar gets a good grip on the local transmission of COVID-19, the country has good enough leverage from the mining industry to achieve a significant upturn in the economy in 2021.

The mineral mining sector in Mongolia, despite the restrictions of the global pandemic, thrived as mining companies such as Erdene Resources managed to attract investment into their Mongolian gold mines. The have even expanded mining projects by acquiring new mining licence districts in the country. Trouble is afoot, however, at the Oyu-Tolgoi copper-gold mine project run by Rio Tinto subsidiary Turquoise Hill. The government in January 2021 said it was unhappy that it now has a price tag of $6.75bn, up from the original estimate of around $5.35bn. Ministers expressed anxieties that the government would not receive any financial gains from the mine and would incur a debt of $22bn to be paid off by the end of 2051. Renegotiations are in store. Overall, if mining in Mongolia stays buoyant, the country’s hopes for the diversification of its economy, and a move away from mining, might take a back seat in the upcoming years.

Mongolia’s tourist industry crumbled in 2020, and many tourist companies have closed down, and as of 3Q20 officially around 53,000 foreigners had visited Mongolia last year, just one tenth of the number of foreign visitors in 2019. The industry used to account for 10% of the country’s GDP but in 2020 it barely made 1%. It will take at least two years for the industry to recover.

Agriculture, especially cashmere production, took a huge hit as many consumers around the world especially in Europe weren’t buying raw cashmere, and even when they did, they weren’t getting it from Mongolia. The government tried to salvage the situation by giving cash subsidies to herders and encouraging them to sell their product at half the previous price, but that backfired as many herders started to stockpile their raw cashmere and hurt cashmere processing companies by forcing them to buy at a higher market price.

With global warming and the desertification of grazing land in Mongolia, many herders have been struggling in any case, and most of them have relied on selling their raw cashmere in the spring to earn some profit and even stay afloat. More and more herders might leave their profession and find other work, and the prosperity of mining in Mongolia might result in a second wave of illegal artisan miners in 2021.


After 7% growth in 2018 and 5% in 2019, the 2020 contraction of 5.2%, as forecast by the World Bank in its Global Economic Prospects January edition (or somewhere over 2% if the government's estimate proves more accurate), is a nasty shock for Mongolia.  Mongolians will be dearly hoping the World Bank is right that 2021 will bring a recovery of 4.3%. The depreciation of the tugrik (MNT) looks set to continue. Mongolia's policy response to the pandemic saw it draw on more external financing, taking public debt towards 70% of GDP. Total public and private debt has reached nearly 300% of economic output. Nominal GDP in Mongolia amounted to around $13.7bn, or $4,151 per capita, in 2019.


The Mongolian government amended its budget early in November at a time when Mongolia was facing up to its first recorded local COVID-19 transmissions. The need for speed meant there was very little oversight of the draft budget, and the situation attracted criticism. As the government has planned more expenditure and intends to invest in more state-owned companies, this means less oversight and more government expansion, and without good supervision of the government’s budget expenditure there is a risk of increased corruption. The government has set a record for expenditures this year.

Source: National Statistics Office.

It is likely that the trajectory of expanded expenditure will not change in 2021; it might improve slightly but not significantly. The spillovers of 2020 will probably wane in 2021.

Mongolia received more than $500mn in COVID-19 relief in 2020, of which $326mn was via foreign loans. In November 2020, the World Bank provided an additional $26.9mn from its COVID-19 Emergency Relief Fund; $2.2mn came from the e-Health Project, and the European Union re-allocated $750,000 for COVID-19 relief.

There is a state budget allocation of MNT47bn (roughly $16.4mn) for COVID-19 vaccines, and the finance ministry has applied for a $50.6mn loan from the World Bank for vaccines.

The Asia Development Bank (ADB) said it would provide $1.5mn to support Mongolia's efforts against the coronavirus outbreak and then opted for an additional $1mn grant. $100mn in budget support and $30mn in additional funding for the Health Sector Development Programme will be provided to reduce the impact of the coronavirus pandemic.

Mongolia’s debt maturities will start to mount in 2021, and the government will likely ask for extensions or cancellations of certain loans, in the same way as the Bank of Mongolia and the People's Bank of China signed an agreement to extend their swap agreement until 2023, which had been scheduled to end in 2020.  On November 25, 2020, Mongolia’s parliament and the All-China People's Congress convened digitally. Mongolian lawmakers requested that, given the coronavirus crisis, the Chinese cancel or reduce debt owed by Mongolia under the swap agreement.