Despite a balance of payments deficit, the situation is being influenced on one hand by rising imports of goods, and on the other by export revenues falling short of expectations. A drop in export income weakens the tugrik’s purchasing power and poses a risk of putting pressure on foreign exchange reserves. The sharp decline in mining exports has reduced budget revenues and created conditions for a fiscal deficit.
The recovery in agriculture, construction, and manufacturing played a key role in the 2.4% economic expansion. However, slower-than-expected growth in the mining sector negatively impacted related areas such as transportation, logistics, warehousing, and trade, slowing overall economic growth. Supply-side increases in the prices of goods and services contributed to rising inflation.
Toward the end of last year, expectations for steady economic growth and overly optimistic projections of export revenues led to a significant expansion of current expenditures and the launch of large-scale projects without prioritizing them based on economic return. Looking at the current economic conditions, this uncalculated overspending resembles the proverb, “Overambitious plans often end in disappointment.”
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