From Natural Resource Boom to Sustainable Economic Growth: Lessons for Mongolia

Abstract

Some resource-rich developing countries are in the process of harnessing immense mining resources towards inclusive growth and prosperity. Nevertheless, tapping into natural resources could be challenging given the large front-loaded investment, volatile capital flows and exposure to global commodity markets. Public investment is needed to remove the often-large infrastructure gap and unlock the economic potential. However, too rapid fiscal outlays could push the economy to its limit of absorptive capacity and increase macro-financial vulnerabilities. This paper utilizes a structural model-based approach to analyze macroeconomic impacts of different public investment strategies on key fiscal and non-fiscal variables such as debt, consumption, sovereign wealth fund, and real exchange rates. We apply the model to Mongolia and draw policy recommendations from the analysis. We find that fiscal policy adjustment, particularly moderating infrastructure investment and optimizing investment efficiency is needed to maintain macroeconomic and external stability, as well as to boost the long-term sustainable growth for Mongolia.

Citation

Gupta, P.; Li, Bin Grace; Yu, Jiangyan. From Natural Resource Boom to Sustainable Economic Growth: Lessons for Mongolia. International Monetary Fund, Washington, DC, USA (2015) 30 pp. [IMF Working Paper 15/90]

From Natural Resource Boom to Sustainable Economic Growth: Lessons for Mongolia

Help us improve GOV.UK

Don’t include personal or financial information like your National Insurance number or credit card details.