S&P reaffirms Mongolia's 'B' ratings with stable outlook

2021-08-03 10:12:32

Ulaanbaatar /MONTSAME/. S&P Global Ratings announced on Thursday that it has maintained Mongolia's credit rating at 'B' and the outlook at 'stable'.

The following factors led S&P to keep the credit rating and the economic outlook unchanged:

-Mongolia's economy shrank by 5.4 percent in 2020 due to the negative impact of the pandemic. However, thanks to the global economic recovery and rising mineral prices in the international market, the country’s economy growth is expected to reach 6.7 percent in 2021 and 7 percent in 2022.

-Even though the spread of COVID-19 has been increasing in Mongolia since April of this year, the economic recovery will continue as the indicators related to the external sector, state budget and external debt are improving as compared with 2020. The recovery will be driven by factors such as Mongolia's level of vaccination, fiscal spending measures, and growth in mineral exports due to the global economic recovery.

-The level of vaccination in Mongolia is relatively higher than in other developing countries, which reduces the economic uncertainty caused by the pandemic. Two-thirds of Mongolia's population has received a single dose of the vaccine, and more than 60 percent have been fully vaccinated against COVID-19.

-Economic outlook in the medium term will be relatively favorable due to foreign direct investment in the mining sector. Economic growth due to foreign direct investment in the Tavan Tolgoi and Oyu Tolgoi mining projects will average 6.8 percent by 2024. Mongolia's economic growth is projected to be higher in the medium term than other similar countries in terms of GDP per capita.

-The Government of Mongolia has successfully reduced some of its high external debt risk by successfully attracting concessional foreign financing. For example, the share of Mongolia's total external debt in the current account will reach 181 percent in 2020, increasing from the 2019 level, but will decrease to 159 percent in 2021.

-The Bank of Mongolia successfully extended the CNY 15 billion swap agreement with the People's Bank of China in August 2020 until 2023, which has reduced the pressure on foreign exchange reserves.