Mongolia’s Economy Grew 7.8% and Its Inflation Hit 12%. The IMF Says the Underlying Momentum Is Subdued.

Mongolia is posting some of the strongest headline growth of any economy this year and some of the highest inflation. The IMF's assessment is that neither number describes the situation accurately.

Buoyant mining activity underpinned GDP growth of 7.8% year on year through April, the Fund said following its 2026 Article IV consultation, published on 6 August — while noting that underlying growth momentum remained subdued and that the headline rate is projected to moderate owing to base effects.

Inflation is the more urgent figure. Having moderated for several months, it began rising again from March and reached 12.0% year on year in June, driven by surging meat and energy prices. The Fund expects it to remain elevated.

That combination — mining-led headline growth, weak underlying momentum, double-digit inflation in food and fuel — describes an economy where the strong sectors and the ones households experience are not the same.

Coal volumes rose. Coal revenue collapsed.

The structural story underneath is a change in what Mongolia sells and what it earns for it.

Total coal export volumes rose 7% year on year in 2025, from 83.8 million tonnes to 89.7 million, surpassing the government's 85 million tonne target. Export value fell to $5.8 billion, down 34%. The year was characterised by a widening gap between volume and value: shipments increased while prices weakened materially, with weaker activity in China's steel and industrial sectors driving stockpiles up and pricing down at the border.

The Ministry of Economy and Development projects 90 million tonnes in 2026 at an average price near $70 a tonne, implying proceeds of roughly $6.3 billion — a modest recovery, still far below the $8.6 billion earned in 2024.

Copper has taken up the slack. Copper ore exports surged 76% and gold rose 38% on strong global prices, with production at the Rio Tinto-operated Oyu Tolgoi mine expanding as underground operations scaled up. The IMF noted that higher copper exports and softer import demand helped narrow the current account deficit in 2025.

Mongolia has effectively swapped a low-price bulk commodity for two high-price ones. That is fortunate rather than planned, and it leaves the economy exposed to a different set of prices.

The dependency problem

Mongolia's position is unusual even among commodity exporters, because both ends of its external position run through a single partner each.

China receives roughly 90% of Mongolian exports — 88.9% in January and 91.3% in February this year — and supplies more than a third of its imports. Russia supplies around 90% of Mongolia's energy.

That means Chinese industrial demand sets Mongolia's export revenue while Russian supply arrangements set its energy costs. Neither is subject to Mongolian policy. In a year when global energy prices have risen sharply, the second of those dependencies is the one showing up in the 12% inflation rate. Analysts have warned that a prolonged closure of the Strait of Hormuz could push crude substantially higher, which for a landlocked economy importing almost all its fuel is transmitted directly to consumers.

One partial offset has come from an unexpected direction: reduced Chinese domestic coal output following a mine accident is expected to support Mongolian export demand, and the prime minister has stated an aim of increasing trade with China by more than 10% this year.

The currency has held

The tugrik has been remarkably stable through all of this. It traded around 3,594.5 to the dollar in mid-August, weakening 0.21% over the preceding month and essentially unchanged over twelve months.

For an economy running double-digit inflation and dependent on commodity revenues, that stability is notable. The IMF has nonetheless flagged an urgent need to strengthen the Bank of Mongolia's operational independence to secure monetary and external stability — a recommendation that pre-dates the current inflation episode.

What to watch

Whether inflation peaks is the immediate question. It has been rising since March, and the drivers — meat and energy — are supply-side and largely outside monetary control.

The second is coal pricing. The Ministry's $70 a tonne assumption underpins the 2026 budget, and public accounts returned to deficit in 2025 after several years of surplus, largely because coal revenue disappointed.

The third is growth composition. The IMF's distinction between headline expansion and subdued underlying momentum is the most important sentence in its assessment, and the gap between the two is where Mongolia's actual condition sits.