Mongolia Economic Update, November 2024

Mongolia's coal-driven economic growth since 2023 has elevated the country to upper-middle-income status (UMIC) in 2024. Real gross domestic product (GDP) growth has remained robust, driven by mining and transport services, despite a sharp contraction in the agriculture sector. On the demand side, domestic demand was a key driver of growth, while the contribution of net exports to economic growth turned negative despite strong export performance. Boosted by increased income and trade-related revenues, the fiscal balance remained in surplus despite sustained high spending. In addition, Mongolia should consider reforms to its fiscal system to enhance its effectiveness and efficiency in tackling poverty and income inequality. The special chapter of this MEU summarizes the findings from a forthcoming World Bank analysis (commitment to equity) on the distributional impacts of the Mongolia's fiscal system in chapter 2. This analysis reveals that while the fiscal system - encompassing both taxation and transfers - has a marginal effect on reducing poverty, it exhibits strong broad-based redistributive effects