#Mongolia #Ulaanbaatar #Economic Crisis #Coalition Government

Crisis on the Horizon: Mongolia's Coalition Government Vote

As Mongolia's parliament gets ready for a pivotal vote on the continuation of the coalition government, concerns about the potential fallout are rising. Analysts warn that the collapse of the government could trigger an economic downturn, severely impacting the nation's revenue and foreign investments.

A recent study from the Mongolian Development Board highlights dire projections, indicating that Mongolia's economy might contract by more than 20% within six months and when it comes to foreign direct investment (FDI), it could plummet nearly 40% year-on-year. This analysis suggests that political instability could jeopardize the economic gains the nation has achieved over recent years.

Prime Minister Oyun-Erdene recently urged members of the State Great Khural to consider whether the coalition government should remain in power, emphasizing that this decision could put an end to the ongoing political uncertainty. The confidence vote, set to be one of the crucial moments in Mongolia's political journey since its democratic establishment in the early '90s, is scheduled for Monday.

As the vote approaches, fresh economic data warns of the potential consequences of a government collapse. Key insights from the Mongolian Development Board forecast a decline of 22% in Gross National Income within six months, a staggering 12.2% annual rise in inflation, and an unemployment rate increase of 2.5%. By the end of 2025, Mongolia's currency, the tugrik, could depreciate by 17.9% against the US dollar, and the Political Stability Index might drop by 18 points year-on-year.

These stark forecasts echo the experiences of other nations where political instability has resulted in economic turmoil. Historical data from the World Bank reports that the disbandment of a coalition government in Estonia saw FDI crumble from 7.54% in 2021 to a mere 0.74% by 2024, with its economic growth plummeting from 7.3% in 2021 to -0.9% in 2024.

Furthermore, an international study covering data from 169 countries between 1960 and 2004 established a correlation between high political instability and reduced GDP per capita growth, attributing this decline to decreased productivity and lower accumulation of physical and human capital.

Dr. Batnasan B., an esteemed faculty member at the National University of Mongolia's School of Business and a board member of the Mongolian Development Board, commented on the situation, stating, "Recent data clearly outlines the potential economic ramifications of Mongolia's coalition government collapsing - a severe economic slowdown, rampant inflation, and skyrocketing unemployment. Officials must decide who should govern the country, but it is equally vital that these choices are made with comprehensive access to facts and a clear understanding of possible risks."

The analysis from the Mongolian Development Board, complemented by global precedents, delivers a stern warning: all economic progress made by Mongolia post-COVID-19 could be severely compromised if the impending vote elicits further political turmoil. The nation has already added $9 billion to its economy, and its per capita GDP has risen by an impressive $2,400 since the pandemic's onset.

In summary, the upcoming vote is more than just a political crossroads for Mongolia; it is a decisive moment that could either secure the country's economic trajectory or plunge it into a severe crisis. Stakeholders are urged to pay close attention as the parliament addresses this crucial decision with the weight of Mongolia's economic future resting on their shoulders.