Industry Trend Analysis - 2017 Budget To Support Mining Industry, But Headwinds Remain - JAN 2017
BMI View: The Mongolian government ' s supportive policies for the mining sector and approvals granted to the Tavan Tolgoi and Oyu Tolgoi projects will attract more foreign investors to the country in the coming years. Nevertheless, headwinds remain as the country continues to depend on China for most of its exports, exposing itself to political discord, demand fluctuations and regulations by the Chinese government.
The Mongolian mining industry will return to being an attractive destination for foreign investment in the coming years with improving commodity prices and following the return to power of the relatively stable and coordinated Mongolian People's Party's (MPP) in the 2016 parliamentary elections. In November 2016, the new parliament approved the country's Public Budget for 2017, in which revenue will make 23.3% of GDP, expenditure -32.3%, and deficit -9.1%. A significant component of expenditure will be used to improve infrastructure in the mining sector and there will be no increase to taxes in order to help miners and attract investors. This is a fresh start to the mining industry since the exit of the Democratic Party (DP), which lacked unity amongst its leaders and had a hard resource nationalism line. Almost all anti-mining and pro resource-nationalism parliamentary members have now been voted out of parliament, paving the way for a more enticing business environment. The Cabinet of Ministers expects to reach 3% economic growth in 2017 by moving forward on mining mega-projects such as Oyu Tolgoi and Tavan Tolgoi. After being stalled for years, the two projects have now started progressing.
Tavan Tolgoi Deal Restart To Lift Economic Health
|Better Growth Ahead With Government Ordinance|
|Mongolia - GDP And Mining Industry Value Growth (% y-o-y)|
|e/f = BMI estimate/forecast. Source: USGS/IMF/BOM/BMI|