Inflation in Mongolia

A short history of inflation in Mongolia

The Mining Boom (2007 to 2008)

Mongolian inflation peaked at 34.4% in the year to August 2008. Mongolia sits on very large copper and coal deposits, and the commodity boom of the 2000s delivered revenue faster than the government could sensibly spend it; public spending and wages rose steeply, while an economy that imports most of its food and fuel met the global price spike of that year at the same time.

The pattern has repeated with the commodity cycle since, which is the central difficulty of a small economy dependent on a few mineral exports: the revenue arrives in surges, and spending it as it arrives transmits the surge into domestic prices. The Bank of Mongolia has operated with an inflation target since 2007.

Post-Covid Inflation (2021 to 2023)

In Mongolia, prices rose fastest in June 2022, at 16.9%. The causes of the post-Covid inflation were global in nature, beginning with the lockdowns: factories and ports closed and the shipping between them fell out of sequence, so goods took longer to make and longer to arrive. Governments had spent heavily supporting household incomes through those closures, so when restrictions lifted there was money waiting to be spent and not enough on the shelves to spend it on. Then in February 2022 Russia invaded Ukraine, disrupting two of the world's largest suppliers of wheat, fertiliser, oil and gas at once, and the cost of everything grown, heated or transported rose with them.

Because the causes were shared, so was the timing: most countries peaked within a few months of one another in late 2022. The major inflation events covers this episode and the others in more detail.