Fall of Mongolian coalition government could lead to severe economic downturn

  • Mongoliafaces a crunch parliamentary vote on Monday which could lead to fall of coalition government
  • New analysis from Mongolian Economic Development Board indicates this could lead to a sharp fall in national income and foreign direct investment (FDI), as well as spiralling inflation
  • Political instability will jeopardise economic progress achieved in the last few years

ULAANBAATAR,Mongolia,June 1, 2025/PRNewswire/ -- AsMongolia'sparliament prepares to vote on Monday on whether the country's coalition government should remain in office, new economic analysis warns that the demise of the government could see the size ofMongolia'seconomy contract by over 20% within six months, and FDI fall by almost 40% year-on-year.

Prime Minister Oyun-Erdene called on Wednesday for members of the Great State Khural to decide on whether the coalition government, which has been in place since last June's parliamentary elections, should remain as a way of ending recent political instability. The Prime Minister is due to address the Khural on Monday ahead of a'confidence vote'– likely to be deemed one of the most important moments inMongolia'spolitical history since becoming a democracy in the early 1990s.

As the vote approaches, new economic data – which can be viewed in fullhere– produced byMongolia'sEconomic Development Boardwarns of the scale of the economic hitMongoliacould face, namely:

  • A 22% reduction in Gross National Income within six months
  • A 12.2% increase in inflation within a year
  • Year-on-year unemployment rising to 2.5%
  • The Mongolian Tugrik depreciating against the US Dollar by 17.9% by the end of 2025
  • An 18-point year-on-year decrease inMongolia'sPolitical Stability Index

These forecasts are in line with the experiences of other countries where political instability has had a negative impact on the economy, including following the fall of a coalition government:

  • According to data from the World Bank and other key sources, the coalition breakdown inEstoniacaused FDI to tumble from 7.54% in 2021, to 0.74% in 2024, and its economic growth to stall from 7.3% in 2021, to -0.9% in 2024
  • An international study analysing data from up to 169 countries between 1960 and 2004 has concluded that high levels of political instability are associated with lower GDP per capita growth, particularly due to declining productivity growth and reduced accumulation of physical and human capital

Commenting, Dr Batnasan B., Professor at the Business School of theNational UniversityofMongoliaand Member of the Economic Development Board, said:

"The latest data clearly highlights the potential economic consequences of a collapse inMongolia'scoalition government: a sharp economic downturn, runaway inflation, and a rise in unemployment.

"It is entirely appropriate that elected representatives decide who governs the country. But it is equally important that such decisions are made with full access to the facts and a clear understanding of the potential risks.

"The Economic Development Board's analysis—combined with lessons from other countries that have faced similar circumstances—presents a compelling warning: all the hard-won economic progressMongoliahas achieved in recent years could be jeopardized if Monday's vote results in increased political instability."

This new analysis, as well as precedent from around the world, clearly shows the magnitude of the decision to be taken by lawmakers on Monday, and the jeopardy to the significant economic progressMongoliahas made since the COVID-19 pandemic, including adding$9 billion USDto its economy and increasing GDP per capita by an additional$2,400.

NOTES

Economic Development Board ofMongolia:https://www.facebook.com/profile.php?id=61574363563476

Full economic analysis available here:https://nrpa.gov.mn/mn/zasgiyn-gazryn-togtvorguy-baydal

SOURCE Government ofMongolia