MONGOLIA : DIM ECONOMIC OUTLOOK BUT A SOVEREIGN DEFAULT STILL UNLIKELY
Mongolia has been enjoying rapid growth for the last few years on the back of strong Chinese demand and a commodity boom, which suddenly came to a stop in 2014 and quickly pushed the country into stagnant growth and sharply increased financial fragility.
A sovereign default has been averted so far and we believe it is not due to happen any time soon as commodity prices are starting to recover and, if push comes to shelf, IMF financial assistance could be granted. Another source of foreign currency liquidity, to avert a sovereign default, is obviously China given Mongolia’s abundance of natural resources and its relevance within the Belt and Road strategy.
That said, economic growth should remain subpar (Chart 1), due to fiscal and monetary tightening and risks still remain for further depreciation of the Mongolian Tugrik.
Real good article. Nobody could analyze Mongui without take it account the real economy links with China & Russia. I follow Mongui you can see mi posts in Twitter @aabelatrekking
Strategy, transformation, M&As and divestitures in technology, banking, insurance and payments
8yA radical shift has already taken place in this world. Its AIIB in the east vs IMF in the west. IMFs intervention will only be seen as a desparate effort to regain some ground in the east. That's my opinion. Any ways the Mongols will enjoy great inflows.
Mongolia would definitely prefer to avoid as much official Chinese involvement as possible. They need to be set the playing field as level as possible for their commodity investors /partners to avoid concerns of Russian-style interference.
CEO at Mongolian Swan Corporation
8ya) An IMF bailout without a very SERIOUS China's involvement would lead to unsustainable results. Period. b) Does China really want IMF to meddle in neighbor's business? I doubt. c) At the end of the day, in the bailout, IMF might only be a ...character witness ...enabling an easier rollover of the debt to extend the duration consistent with the duration of the mining assets (OT II producing in 2022?) ....once Mongolia has given up to China's requests, with 2 key aspects: i) Raising $ and ii) Symbols Mongolia is really open for business. Among actions that tick i) and ii) are: * full MNT banking license to BOC, * GOM selling ~9% of OT to RIO/TRQ, * Economic Pardon Law 2.0 (with say 10% of MNT pardoned invested in 15 years 5% MNT GOM bonds), * sending Mongolian army to Gatsuurt so that Centerra's rights are enforced.