Macroeconomic Forecast Mongolia

Mongolia's general government budget surplus narrowed significantly in y-o-y terms over the first eight months of the year. The surplus totalled just MNT3.7bn in January-August, down 98.3% from the MNT211.3bn figure recorded over the same period in 2007. The core reason was rampant spending growth, which came to 66.7% y-o-y, far exceeding the 33.6% y-o-y increase in revenues. On the back of this data, we have revised down our fiscal forecasts through the medium term and now expect Mongolia to post deficits of 2.6% of GDP and 3.1% in 2008 and 2009, respectively. We hold to our long-term view though, that increased royalty and taxation revenues from the mining sector beginning in 2010 will help to push the budget back into the black at that time.

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