The World Bank expects Mongolia’s growth to average at 6% in 2019-2020, according to the the bank’s recently published Mongolia Economic Update report.

The bank bases its expectations on Mongolia’s growth performance last year, which recovered to 5.1% from 1.2% recorded in 2016, and the 6.1% growth recorded in the first half of 2018. At the same time, the report urges that Mongolia should improve the efficiency of its public investment programmes due to “extensive consequences” of the country’s previous overambitious and unrealistic investment programmes.

“Last year was a good year for Mongolia with favourable commodities prices and the successful implementation of the government’s economic recovery programme,” said Jean-Pascal Nganou, World Bank senior economist for Mongolia and team leader of the report. “This resulted in improved fiscal and external balances, triggering a slight decline of the country’s public debt.”

The report expects most major sectors including manufacturing, trade and transport to expand significantly, unlike the agriculture sector, which was exposed to harsh weather conditions during the past winter.

The World Bank notes that the economy remains vulnerable to global commodity prices fluctuations and to a productivity gap. As such, the bank believes Mongolia should focus on diversifying its economy.

“To create a strong buffer against economic vulnerabilities, the government and donors should give a high priority to economic diversification that helps counter the ups and downs of the mining sector. Investing in human capital and strengthening the country’s institutions are the best way to support diversification, together with sound investments in crucial infrastructure,” said James Anderson, World Bank country manager for Mongolia.

The report also highlights potential short- and medium-term risks including regional instability, political risks, climate shocks and natural disasters.