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.
Under the Soviet regime, all land in Mongolia was owned and collectively managed by the state. The 1992 constitution allowed for different forms of private land and immovable property tenure. Apartments were privatized by the thousands, as were industrial centers, farms and livestock. However, partially due to low population densities, the vast majority of land remained public property.
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.
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.
As any businessperson in Mongolia will tell you, the country’s economy is driven by mining and foreign investment. Foreign Direct Investment (FDI) is so important that the GDP growth has risen and fallen largely with the rise and fall of FDI. Even during the 2008 global financial crisis, GDP growth recovered fairly quickly because FDI did not drop too much.
Today's Mongolia is a paradox. Endowed with abundant natural hydrocarbon wealth, the country has grown fast feeding the factories of its energy-hungry southern neighbour, China. At the same time, it is precariously dependant on Russia for much of its own energy supply. Addressing this insecurity is therefore high on the government’s geostrategic to-do list.
Struggling to find reliable returns affects all investors. Volatile investments, currency risk and the need for diversification present challenges for individuals and families. Real estate has often been shown to have a low correlation with the performance of other asset classes- and can be one of the first to outperform when an economy recovers. We looked at five reasons you should consider investing in residential property in UB, now.
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.