Source: Frontier Securities

While 2012 looks to be another year of growth, it will largely depend on the commodities market. Preliminary estimates by the National Statistics Office (NSO) indicate real gross domestic product (GDP) growth of 17.3 percent in 2011.

The agency attributed growth to increases by 42.6 percent in wholesale and retail trade; 17.3 percent in automobile and motorcycle repair; 14.3 percent in construction; and 8.7 percent in mining.

The World Bank has posited that overall growth is driven by infrastructure development for the mining sector as the economy prepares for operations to begin at the Oyu Tolgoi project. Net taxes on products are the biggest contributor to growth, reported the NSO.

“Frontier Securities believes that the latest NSO data shows that infrastructure spending, expansionary fiscal policies, strong commodity prices, booming mineral exports, ongoing development of large mining projects, [and] surging credit growth is translating into very strong consumer spending...” said Dale Choi, chief investment strategist of Frontier Securities.”

Choi said the consensus in the industry is that “furious expansion” will continue and reported a forecast of growth between 15.1 percent and 16.6 percent in 2012 if commodity prices remain favorable.

“Mongolia is completely at the mercy of commodity prices," said Choi, “[as] a mineral dependent economy and bust is just around the corner.”