Standard & Poor’s upgraded their rating for Mongolian sovereign debt from ‘B-’ to ‘B’ with a stable outlook. The news echoes wider confidence that IMF-led reforms and stronger commodity prices have put government finances back on an even keel. S&P is the third ratings agency this year to upgrade their Mongolia outlook, behind Moody’s and Fitch.
The Asian Development Bank (ADB) has revised their projected growth statistics for Mongolia in 2018 and 2019. The forecast for this year was raised to 6.4%, significantly higher than the previous estimate of 3.8%. This momentum is expected to continue into 2019, with the ADB upping their forecast from 4.3% to 6.1%. The announcement underscores growing investor confidence in the country, and echoes a wider consensus that an economic rebound is firmly underway.
Mongolia's GDP has swung from 2011's 17% growth to a mere 1.6% in 2016, back up to a 5% or more growth that exceeds that of saturated economies in the developed world. We'll walk through the country's GDP situation, and touch briefly on the commodity export market in the US.
Mongolia’s financial sector grew from a centrally planned, Soviet-style single bank system to its present composition of fourteen commercial banks, seventeen licensed insurance related companies, 62 stock & brokerage related institutions, 518 Non-Banking Financial institutions (NBFIs), and about 280 Savings and Credit Co-operatives (SCCs). All banks are under supervision by Bank of Mongolia (“BoM”) the country’s central bank, while all NBFIs, SCCs and brokerage and insurance companies report to FRC.
Mongolia faces a daunting task in improving its physical infrastructure, but has an administration with the ability to do it. On the back of stronger economic performance in the last year and pragmatic policy making, Fitch anticipated that the country’s construction industry will grow from MNT1017bn this year to 1589bn MNT in 2020.
One of the most exciting events in the Mongolian financial market this year was the IPO of LendMN, which became the first non-banking financial institution (NBFI) to be listed on the Mongolian Stock Exchange.
For investors investing across international borders, the foreign exchange rate can be incredibly important. If the currency is devaluing fast, any gains on investment into assets valued in that currency can be significantly diminished. Mongolia’s exchange rate (against the US dollar) has not done well in the last few years, due to government policies against foreign investment, but shows signs of stabilizing, as the government has reversed its policies.
Financing sources underpinning investment since 2010 show Mongolia is heavily dependent on FDI, and the sharp drop from 2013-2015 has since picked up. While FDI sharply fell over the last few years, public investment financed by the government budget and DBM rapidly increased, relying on domestic and external debt financing. Looking forward, Mongolia has certain particular areas that foreign investors can enjoy for the time being.
Taxes in Mongolia can be difficult to navigate, so we condensed and shortened some of our 2018 Mongolia Real Estate Report to give to you as useful content for investing in an exciting emerging market.
Mongolian Properties is the oldest, largest, and most reputable Mongolian real estate agent. We are a real estate intermedeiary and advisory firm offering agency, representation, property, management, property valuations, interior design, furnishing and financial intermediation services.
