Fall of Mongolian coalition government could lead to severe economic downturn

Government of Mongolia United Kingdom United States of America Australia France Germany Spain New York

Mongolia faces a crunch parliamentary vote on Monday which could lead to fall of coalition governmentNew 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 inflationPolitical instability will jeopardise economic progress achieved in the last few years– produced by Mongolia's Economic Development Board warns of the scale of the economic hit Mongolia could face, namely:

A 22% reduction in Gross National Income within six monthsA 12.2% increase in inflation within a yearYear-on-year unemployment rising to 2.5%The Mongolian Tugrik depreciating against the US Dollar by 17.9% by the end of 2025An 18-point year-on-year decrease in Mongolia's Political 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 in Estonia caused 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 2024An 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 the National University of Mongolia and Member of the Economic Development Board, said:

"The latest data clearly highlights the potential economic consequences of a collapse in Mongolia's coalition 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 progress Mongolia has 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 progress Mongolia has made since the COVID-19 pandemic, including adding $9 billion USD to its economy and increasing GDP per capita by an additional $2,400.

NOTES

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

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

View original content:https://www.prnewswire.co.uk/news-releases/fall-of-mongolian-coalition-government-could-lead-to-severe-economic-downturn-302470036.html