Mongolia’s Growth to Stabilise at 5% as Mining Strength and Urban Innovation Shape Economic Future: World Bank

Mongolia’s strong performance in 2025 was underpinned by a dual-engine growth model—a sharp rebound in agriculture alongside continued strength in the mining sector.

Mongolia’s economy is set to maintain steady growth in the coming years, but rising global uncertainty and domestic pressures are testing its resilience, according to the World Bank’s latest Mongolia Economic Update.

The report projects economic growth of 5.0% in 2026, following a robust 6.9% expansion in 2025, signalling a transition from post-rebound acceleration to more moderate, sustainability-focused growth.

Mining Power and Agricultural Recovery Drive Expansion

Mongolia’s strong performance in 2025 was underpinned by a dual-engine growth model—a sharp rebound in agriculture alongside continued strength in the mining sector.

Copper production at the Oyu Tolgoi mine, one of the world’s largest and most strategically important copper deposits, played a central role in driving export earnings and economic activity. This helped offset weaker performance in coal exports, which remain sensitive to global demand fluctuations.

Meanwhile, agriculture rebounded strongly after previous disruptions, reinforcing rural incomes and stabilising food supply chains.

Other sectors showed mixed dynamics:

• Construction and manufacturing recorded strong growth, supported by investment and domestic demand

• Trade and services moderated, reflecting softer consumption in some segments

Inflation Pressures Build Despite Strong Demand

Strong export revenues and resilient household incomes sustained high consumer spending, but also contributed to rising price pressures.

Inflation climbed from 6.8% in 2024 to 8.6% in 2025, driven by:

• Elevated food and energy prices

• Robust domestic demand

• External cost pressures linked to global markets

While growth remains solid, managing inflation will be critical to maintaining macroeconomic stability.

Medium-Term Outlook Supported by Infrastructure and Demand

Looking ahead, Mongolia’s economy is expected to grow at an average of 5.5% between 2027 and 2028, supported by:

• Large-scale infrastructure projects, including transport and energy investments

• Continued domestic consumption growth

• Ongoing development of the mining sector, particularly critical minerals

These drivers position Mongolia to remain one of the faster-growing economies in the region, provided external conditions remain stable.

Global Risks Cast Shadow Over Outlook

Despite the positive baseline, risks are firmly tilted to the downside.

Key global threats include:

• Trade disruptions affecting mineral exports

• Prolonged geopolitical tensions, particularly in the Middle East

• Rising input costs, which could squeeze both producers and consumers

Such developments could reduce export demand, increase inflationary pressures, and slow overall economic activity.

Domestically, expansionary fiscal policy poses a double-edged sword: while increased public spending could boost short-term growth, it risks widening external imbalances and fuelling inflation.

A Strategic Shift Toward Diversification and Resilience

The World Bank emphasises that Mongolia’s long-term economic stability will depend on its ability to diversify beyond mining and strengthen resilience to external shocks.

“Protecting macroeconomic stability while diversifying the economy and boosting competitiveness remains a key priority,” said World Bank Country Manager Taehyun Lee.

The report outlines several strategic priorities:

• Addressing infrastructure gaps to reduce costs and improve connectivity

• Advancing critical mineral development to capture higher-value opportunities

• Strengthening climate resilience and disaster preparedness

• Enhancing private sector competitiveness

Urban Innovation: Opportunity and Constraint

A key innovation highlighted in the report is the role of urban clustering, particularly in the capital, Ulaanbaatar.

The concentration of businesses and workers in the city has:

• Boosted productivity and innovation

• Created economic spillover effects

• Strengthened labour market efficiency

However, rapid urbanisation is also creating challenges:

• Traffic congestion and infrastructure strain

• Rising costs of living

• Uneven regional development

Without intervention, these pressures could erode productivity gains.

The report calls for:

• Improved urban planning and transport systems

• Policies to encourage balanced regional development

• Investments in secondary cities and rural economies

Balancing Growth with Stability

Mongolia’s economic outlook reflects a broader global trend: strong underlying fundamentals paired with rising uncertainty.

The challenge for policymakers will be to strike a balance between:

• Sustaining growth through investment and consumption

• Maintaining macroeconomic discipline

• Managing external vulnerabilities

With strategic reforms, infrastructure investment, and a focus on diversification, Mongolia has the potential to transition from a resource-driven economy to a more resilient, competitive, and inclusive growth model.