Mongolia

While Mongolia can look back on a year that began with high expectations for a steady rise in mining-generated wealth, reports of slowing growth and concerns among investors about the risk of resource nationalism cast a shadow over the second half of 2012.

Confidence that Mongolia’s resource wealth will generate unprecedented expansion in its real estate market has seen prices rise and many of Ulaanbaatar’s prime properties snapped up. However, the experience of other countries that have had similar resource-related property growth suggests it may not last forever.

The mobile telephony market in Mongolia is fast maturing, with expanding 2G and 3G coverage set to drive up connections and penetration surpassing 100% by the end of the year.

Plans for a large power plant near Ulaanbaatar underline how Mongolia’s surging growth in resource revenues can be used to meet looming energy shortfalls in urban areas. However, more innovative sources are needed to supply power to the rural expanses of the country’s steppes.

The recent implementation of monetary tightening measures has seen confidence in the stability of Mongolia’s banking system rise in recent months as credit growth slows. However, exponential growth expected in the economy due to an influx of resource revenues will require the central bank to maintain strict macroeconomic vigilance.

Healthy trade figures and predictions that Mongolia will rank among the world’s top-10 fastest-growing economies in the next 40 years has been the source of confidence in the country’s long-term financial potential. However, concerns over trade, regulatory uncertainty and budget deficits threaten the outlook for the near term.