Mongolia Economy

Mongolia Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax system

Basic data

According to, the Mongolian economy is heavily dependent on the mining sector, especially on the export of coal and copper ore, its growth is thus linked to the development of world commodity prices. The government aims to diversify the economy by boosting tourism and domestic consumption. In 2021, the Mongolian economy continued to struggle with the negative effects of covid-19, real GDP grew by only 2.6%, which was significantly affected by high inflation. The Mongolian government will address the slump in the economy by strengthening bilateral relations with China (the largest trading partner) with the aim of further increasing the volume of exports and thereby increasing the country’s economic performance.

A restart of the economy is expected for 2022 and GDP growth is expected to be 6.1%. To a large extent, this growth will be driven by China’s demand for mineral wealth and investment in mining development projects that have been delayed due to the pandemic crisis. The government’s “Recovery Plan” of the country to stimulate and revive the economy affected by the pandemic envisages investments in 1) restoration of border crossings, 2) energy development, 3) industrial development, 4) urban and rural renewal, 5) renewal of green development and 6) increase of state productivity.

The paralysis of the world economy as a result of covid-19 and the war in Ukraine brought about an increase in commodity prices. This caused an increase in production costs and ultimately an increase in dealer prices. Inflation will continue to increase with the weakening of the Mongolian currency MNT (tugrik) against the US dollar, which will make imports of goods and services more expensive. Consumer prices saw a big increase in January 2022 as its national index rose 14.6% year-on-year (the biggest annual increase in 10 years), according to data from the Central Bank of Mongolia. With inflation in mind, there will be pressure on wage growth, which firms will resist due to the financial losses caused by covid-19 and the uncertainty in global financial markets related to the Russian invasion of Ukraine. The unemployment rate in Mongolia was 7.1% in 2021, according to statistics from the World Bank.

Mongolia’s foreign trade turnover for 2021 was USD 1billion, exports USD 9.2 billion (up 21%), imports USD billion (up 28.3%) compared to the same period last year. The balance of foreign trade was a positive USD billion. China had the largest share of foreign trade turnover at 63.1% (increase in volume compared to the previous period by 8.4%), followed by Russia at 12.8% (increase by 0.7%). Exports of goods and services increased in real terms by 7.4% in 2021 compared to an estimate of 9.8%. In 2022, demand for coal and iron ore, which will account for the main share of Mongolia’s exports, is expected to increase. The total volume of Mongolian exports will depend on whether it is possible to negotiate with China to lift border restrictions on the transportation of goods.

Mongolian exports in 2021 by country: China (83%), Switzerland (9%), South Korea (2%), Singapore (3%), Russia (1%), other countries (2%).

Mongolian imports in 2021 by country are as follows: China (37%), Russia (29%), Japan (7%), South Korea (5%), Germany (3%) and USA (3%), other countries ( 16%).

Table from MOP + additionally balance of payments, indebtedness/GDP.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 5 -5.2 2.6 6.1 4.3
GDP/population (USD/PPP) 12,881.10 12,500.00 13,050.00 14,220.00 14,990.0
Inflation (%) 7.3 3.7 6.9 8.2 6.3
Unemployment (%) 5.4 7 7.1 ON ON
Export of goods (billion USD) 50.3 46.3 8.6 9.7 10.5
Import of goods (billion USD) 38.6 34.8 6.9 7.7 8
Trade Balance (Billion USD) 1.2 1.8 1.1 1.3 1.8
Industrial production (% change) ON ON ON ON ON
Population (millions) 3.2 3.3 3.4 3.4 3.4
Competitiveness 62/63 61/63 60/64 ON ON
OECD export risk 07.VII 07.VII 07.VII ON ON


Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -3.7
Public debt (% of GDP) 77.5
Current account balance (billion USD) -1.6
Taxes 2022
AFTER subchapter 2.4
F.O 10%
VAT 10%

Mongolia continued to reform its public financial management and recorded good results especially in the fields of access to public information, budget planning, financial data integrity and external audit. However, there is still room for further reforms in the application of international accounting standards, medium-term budget planning, fiscal risk management and emphasizes better use of country financial performance assessments to improve government service delivery.

Mongolia will continue to run large budget deficits in 2022-2023, but the government’s fiscal position will improve with the lifting of the fiscal moratorium. Increasing tax collection, increased commodity prices and China’s growing demand for minerals will have a positive impact on public revenue levels. The government will gradually withdraw stimulus measures introduced during the pandemic, including temporary tax exemptions and additional unemployment and social security measures. We expect the fiscal deficit to narrow to the equivalent of 2.3% of GDP in 2022 from an estimated 3.7% of GDP in 2021. The government’s consolidation efforts should help reduce public debt levels to 70% of GDP that year.

The increase in revenues to the state treasury and the continued interest of international investors in Mongolian national bonds will help the government meet its obligations in the field of repayment of foreign debt. However, the cost of new loans will become more expensive due to tighter US monetary policy. In the medium term, this will mean an increase in the external debt repayment burden for Mongolia, which already accounts for more than 90% of the total public debt.

Moody’s rating agency changed Mongolia’s rating from B3 negative to stable in 4Q 2021. The agency reached this conclusion based on data on the stabilization of liquidity risks and external pressures. The Mongolian government used a combination of concessional sources and drawing on fiscal reserves to finance the stimulus package during the pandemic, easing liquidity pressures. Loan refinancing also reduced maturities in 2021 and 2022. Furthermore, there was a greater recovery in the mining sector than Moody’s had predicted in its previous report.

Banking system

Mongolia’s vast land area and low infrastructure development make it difficult for rural residents to access banking services found in larger cities. The vast majority of registered companies in Mongolia are micro, small, or medium-sized enterprises that, for various reasons, do not use financial services. Lack of capital reduces the ability of companies to hire more employees, limits their growth and their ability to contribute to the full potential of their country’s economy. Many factors influence this phenomenon, one of which is insufficient financial literacy, high interest rates, lack of acceptable collateral for loans and long-term financing. An adequate regulatory framework for consumer financial protection is also lacking.

There are currently 14 commercial banks operating in Mongolia. Among the largest are Trade and Development Bank (TDB), Khan Bank, Golomt Bank and Khas Bank. The Law on Interest Rates supports SMEs and recommends a maximum 18% annual statutory interest rate for loans up to MNT 100 million and salary loans, a maximum 12% annual statutory interest rate for pension loans, a maximum 24% annual statutory interest rate for all other types loans. The interest rate on medium-term loans was around 14% in 2021. In the case of engagement of a foreign bank, which will provide the Mongolian bank with resources to finance the business case, the annual interest rate is approximately 10-14% due to the high risk margin of the local bank.

Rising inflation and interest rates will bring with them a sharp increase in the debt repayment burden of households and companies and the risk of insolvency of small and medium-sized enterprises. At its January meeting, the Board of the Central Bank adopted a proposal to increase the base interest rate by 50 basis points. By the end of 2022, the central bank could raise key interest rates by as much as 200 basis points to 8% to anchor inflation expectations.

Tax system

In general, personal income tax is levied for taxpayers at a flat rate of 10%. There are certain types of income that are exempt or subject to final withholding tax. Consumption tax is paid on alcohol, cars, cigarettes, tobacco, PHM and some luxury goods. The law also imposes a tax on gaming equipment. The property tax rate is in the range of 0.6-1% of the property value and is paid annually. VAT on goods, services and works produced in Mongolia and imported into Mongolia is a flat rate of 10%.

A resident PO pays tax in Mongolia on its worldwide income. Non-resident POs only pay tax on their income generated in Mongolia. Resident entities pay tax on income from business activities, sale of rights, shares, exchange rate differences, rent, sale of movable property.

Corporate income tax is subject to taxation:

  • 1% in case of annual sales up to 300 million MNT (tugriks)
  • 10% with revenues up to MNT 6 billion (Tugriks)
  • Income above 6 billion MNT (Tugrik) is subject to a tax of 600 million MNT + 25% taxation of income exceeding 6 billion MNT

A VAT of 10% is imposed on goods, services and imports into Mongolia. If the turnover of the company is higher than MNT 10 million, it is necessary to register with the Tax Office and obtain the status of a tax payer. It is also possible to register voluntarily if the taxable turnover reaches MNT 8 million, or if USD 2 million or more have been invested in Mongolia. Income from the sources described below are excluded in determining annual taxable income and are taxed at different tax rates on a gross basis:

  • Income from resource ownership – rents, royalties (fees in the mining sector), dividends and interest – 10%
  • Revenue from the sale of rights – 10%
  • Income from bets, lotteries, etc. – 40%
  • Income from the sale of real estate – 2%

The rate of 20% is applied to income of non-resident POs from dividends, interest on loans and payments for issuing guarantees, income from royalties, goods sold, work and services provided on the territory of Mongolia, rental of tangible and intangible assets, and in case the office transfers its own profit abroad.

The Mongolian government grants tax exemptions, including the obligation to pay VAT, on imports of essential fuels and food products and on imports in growth-promoting sectors (eg agriculture).

Mongolia Economy