Mongolia’s economic outlook signals continued steady growth and structural adjustment amid intensifying political transformation in 2026. GDP is expected to rise by 5.6 per cent — a gradual deceleration compared to 2025 — but still reflecting generally robust momentum. Growth in 2025 was predominantly supply‑driven. The mining sector has been a central driver — a trend that may prove unsustainable amid shifting external conditions.

Mongolia’s non-mining economy grew unevenly by 5.3 per cent. Agriculture was the standout contributor, surging by 33.8 per cent due to favourable conditions following the severe 2023–24 winters — which lifted herd numbers and pastoral productivity. Agriculture’s gains were primarily pastoral rather than being driven by crop output.

Construction expanded by more than 15 per cent on the back of public investment and housing development. Manufacturing grew by 8 per cent as food processing and wool- and cashmere-based industries increased capacity utilisation. The energy sector also grew moderately, despite persistent electricity shortages and ageing infrastructure.

But services faced significant strain in 2025 as reduced coal export revenues led to employment declines of 6.6 per cent in the trade sector and 3.1 per cent in the transport sector. Both sectors are expected to recover gradually from 2026 onwards as household consumption strengthens and labour market conditions stabilise.

On the demand side, consumption grew by 9 per cent, driven by rising wages and strong credit growth. This helped offset a 5.8 per cent contraction in investment in the first three quarters of 2025. The shift toward supply-driven growth marks a notable shift toward a growth model powered by production capacity and external commodity conditions.

Mining will remain Mongolia’s core growth engine in 2026. Relatively strong global prices, alongside stable output from the Oyu Tolgoi copper and gold mine, will underpin sectoral performance, with coal continuing as the key driver. Non-mining growth is likely to diversify — agricultural expansion will moderate due to its high base. Growth in construction, manufacturing and services is likely to accelerate.

Inflation remained elevated at 7.5 per cent in December 2025, above the Bank of Mongolia’s target range. Food prices rose 11.3 per cent, while non-food inflation eased to 6.1 per cent. Poor harvests, weak seasonal declines in meat prices, rising wages and fuel supply risks all contributed to persistent inflationary pressures.

Regulated price hikes — especially sharp electricity tariff increases from late 2024 and heating tariff adjustments — added further cost‑push pressure. Though the Bank of Mongolia raised its policy rate to 12 per cent, inflation may climb again in early 2026 due to public‑sector wage hikes before easing toward 6.1 per cent in 2027. Food-driven inflation will continue to strain households.

Foreign trade totalled over US$27 billion, with a US$4.4 billion surplus as exports reached US$15.8 billion and imports US$11.3 billion. Compared with 2024, exports dipped by 0.1 per cent and imports declined by 2.6 per cent. Export composition shifted strongly — copper ore exports surged 76 per cent and gold exports rose 38 per cent on strong global prices, while coal exports dropped 34.6 per cent amid weaker demand and falling prices. Though Mongolia benefited from high metal prices, its heavy reliance on coal continues to expose it to fluctuations in Chinese demand and global commodity cycles.

Fiscal performance deteriorated in 2025, with the structural budget balance posting a MNT 1.2 trillion (US$796 billion) deficit — contemporaneously estimated at 1.5 per cent of GDP. Revenue growth slowed to 1.3 per cent, while spending increased by 2.3 per cent — led by current transfers, goods and services and capital outlays. Despite underperforming on revenue, Mongolia’s debt remained relatively low at an estimated 39.7 per cent of GDP, while foreign exchange reserves reached over US$7 billion — a historic high — helping bolster macroeconomic stability.

These economic changes took place within a highly turbulent political landscape. A three-party coalition government collapsed in June 2025 after a no-confidence vote triggered by mass protests in Ulaanbaatar over corruption, inequality and alleged government waste. Factional tensions within the ruling Mongolian People’s Party have persisted despite the formation of a replacement governing coalition. The opposition Democratic Party also underwent major renewal, electing reformist Odongiin Tsogtgerel as chairman ahead of the 2028 elections.

In September 2025, the new government launched the ‘New Confidence – Bold Reform’ program within the 2026–2030 Five-Year Development Plan. The reforms target ten major domains. These include government efficiency, taxation, state-owned enterprises, public administration, rural development and green energy. Austerity measures were also introduced to close a potential MNT 3.3 trillion (US$6.7 billion) budget gap. The government has further pursued downsizing of the civil service and restructuring of state-owned enterprises. Long-term feasibility will be hampered by scale and sensitivity despite early macroeconomic stabilisation. The agenda will face pressure from public expectations, entrenched bureaucratic interests and shifting political alignments.

Mongolia’s 2026 economic trajectory will hinge heavily on the external environment, particularly global commodity markets and Chinese demand. Domestically, political consolidation — marked by an increasingly assertive presidency and reduced intra-party fragmentation — will be critical to shaping policy implementation. The government’s ability to manage internal tensions, sustain reform momentum and mitigate external vulnerabilities will determine whether Mongolia can maintain stability during this pivotal phase of economic and institutional transformation.

Narantuya Chuluunbat is Professor at the Economics Department of the National University of Mongolia.

Published Date:2026-02-25