In 2014, the economy is undergoing an adjustment in response to the large external and internal imbalances. Economic growth slowed to 7.4 percent in the first quarter of this year, from 12.3 percent in the last quarter of 2013. Despite robust mineral GDP growth at over 27 percent, non-mineral GDP growth dropped to 3 percent in the first quarter of this year, down from 15.6 percent in the previous quarter. Domestic demand is now under growing pressure from high inflation and continued currency depreciation. Annual economic growth is expected to soften to 9.5 percent in 2014 reflecting waning domestic demand, despite robust growth of mineral production led by revamped copper production at the new Oyu Togoi (OT) mine. Considering the expanded domestic credit and currency depreciation trend, inflation will likely remain at a double-digit level for the remainder of the year.

Economic growth is likely to soften in 2014 as the economy began to adjust to the large balance of payments pressure and high inflation. High inflation and rising cost of production amidst continued currency depreciation will likely weigh on domestic demand. Fixed investment will also likely remain weak as the business sentiment remains fragile and high uncertainty continues amidst the prolonged conclusion of negotiations on the second phase investment of OT mine. Despite the robust growth of mineral production over 20 percent boosted by the production of OT mine, its spill-over to non-mineral sector growth is likely to be limited the coming years as the contribution of increased production and exports from OT mine to budget revenue is yet to be fully materialized.