Singapore, October 31, 2019 GDP growth has accelerated, but will moderate following slowing exports and shifting demands
Challenges remain around structural reforms, which could be credit negative if progress slows
Moody's Investors Service says in a new report that the credit profile of Mongolia (B3 stable) balances the country's high external and liquidity risks against its strong medium-growth prospects stemming from the extraction of plentiful natural resources.

"While Mongolia's economic growth has significantly accelerated over the past two years, supported by commodity exports and investment, we expect GDP growth to moderate to 6.2% and 5.5% in 2019 and 2020 respectively, from 6.9% in 2018," says Anushka Shah, a Moody's Vice President and Senior Analyst.

Slower export growth, driven by a moderation in China's economy (A1 stable) which absorbs more than 90% of Mongolia's exports, and the shifting demand and supply dynamics for coal and copper – which are Mongolia's main mining exports – are the key factors behind the country's declining pace of growth.

Domestically, while Mongolia has executed significant fiscal and monetary tightening since 2017, its progress on structural reforms has been mixed. In particular, delays in the disbursement of a sixth tranche of funding under an IMF program point to entrenched institutional constraints with the potential to undermine financial stability.

In addition, Mongolia remains reliant on continued external funding flows, and its external position could come under pressure as external debt repayments start to come due in 2021.

Moody's conclusions are contained in its credit analysis on Mongolia, which examines the sovereign in four categories: economic strength, which Moody's assesses as "low (+)"; institutional strength "low (-)"; fiscal strength "very low"; and susceptibility to event risk "high (-)".

Subscribers can access the report "Government of Mongolia – B3 stable: Annual credit analysis" at: http://www.moodys.com/researchdocumentcontentpage.aspx…

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This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Anushka Shah
VP-Senior Analyst
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
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Client Service : 852 3551 3077

Gene Fang
Associate Managing Director
Sovereign Risk Group
Moody's Investors Service Singapore Pte. Ltd.
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Client Service : 852 3551 3077

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Published Date:2019-10-31