The prospects for Mongolia look good, following recent volatility, according to fund manager NN Investment Partners.
After seeing GDP growth reach 17% in 2011, Mongolia then suffered, when commodity prices fell, and demand from China for its exports dipped. As a result of this and other factors, Mongolia’s fiscal deficit ballooned and its currency slumped. But this is now changing, according to Leo Hu, senior portfolio manager, EMD Hard Currency at NN Investment Partners.
“After years of troubles, the stars are finally aligned for Mongolia. Prices of coal and copper – the country’s two main exports – have started recovering, which should boost the government’s coffers,” Hu commented. Hu said the new government is addressing the country’s macroeconomic weaknesses, and to repair its image among investors. It has also secured a US$5.5 billion support package by the International Monetary Fund (IMF).
Hu said: “The IMF programme should spearhead Mongolia’s path to recovery. The aim is to end the country’s boom-bust cycle and set the foundation for sustainable growth.” He concluded: “The catalysts for sustainable growth are all in place: the new government is business-friendly and committed to long-term structural reforms; the IMF package has helped to soothe short-term volatility; mining operations are set to take off; and commodity prices have probably bottomed. As investors, we believe that Mongolia is likely to make good use of this lifeline and emerge stronger.”