Mongolia Economic Growth Accelerates as State Spending Increases

Mongolia’s second-quarter economic growth accelerated from the first three months of this year as the government boosted spending on infrastructure.

Gross domestic product grew 14.3 percent in the three months from April through June, compared with 7.2 percent in the first quarter, according to the National Statistics Office of Mongolia. Expansion in the first half was 11.3 percent, compared with an annual pace of 12.4 percent in 2012.

Mongolia, which raised $1.5 billion in a sale of bonds last year, has increased government spending this year as foreign investment plunged and slowing demand from China, which buys more than 90 percent of its exports, cut sales of coal by almost half. The Mongolian central bank has reduced its policy rate three times this year to aid growth.

Spending of proceeds from the bond sale “contributed much to the economy in the second quarter,” Ganbaatar Gerelt-Od, senior vice chairman of the National Statistical Office of Mongolia, said in an interview from Ulaanbaatar. A more than 20 percent increase in agricultural production also fueled growth, he said.

Projects funded by the bond sale include the construction of roads linking six provinces to Ulaanbaatar, according to Deputy Minister of Economic Development Ochirbat Chuluunbat.

Mongolia’s economy, fueled by a mining boom, grew at a record 17.5 percent pace in 2011. That pace slowed after the country implemented measures to increase government oversight of the mining industry, which spurred disputes with companies including Rio Tinto Group and discouraged foreign investments. The World Bank in April cut its forecast for annual growth this year to 13 percent from an earlier 16.2 percent.

Investment Slows

Foreign investment in the first half declined 43 percent from a year earlier to $1.41 billion, according to central bank data. Mongolia’s coal exports fell to $542.4 million from $1 billion, government data showed. Total exports in the first half slid to $2.35 billion from $2.53 billion, according to the statistics office.

Mongolia’s currency, the tugrik, has fallen 13 percent this year, hitting a four-year low last week.

In the first seven months of this year, Mongolia exported $595.5 million of coal, down from $1.16 billion a year earlier, the statistics office said today. Gold exports increased to 4.7 tons from 1.2 tons, it said.

To contact the reporter on this story: Michael Kohn in Ulaanbaatar at mkohn5@bloomberg.net

To contact the editor responsible for this story: John Liu at jliu42@bloomberg.net

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