Unrest Increases Risks To Government's Policy-Making Ability
BMI View: We have downgraded Mongolia's short-term political risk rating to 68.3 from 70.4 on the back of growing downside risks to the government's ability to enact policy, as growing public unrest could sway the resolve of its minority coalition partners. We further caution that the growing distrust of the government's policies could be a boon for the opposition Mongolian People's Party in the next elections. Should the government fail to arrest the growth slowdown, policy continuity beyond the ruling Democratic Party's term (which will run up to 2016) will most likely be at risk.
Mongolia's ruling Democratic Party (DP) continues to make the right noises. Most recently, a stimulus bill as known as the '100-day action plan' was unveiled by Prime Minister Altankhuyag Norov at the start of May, under which he aims to reduce bureaucracy, reissue exploration licenses, develop two free economic zones and build transport infrastructure, in hopes of wooing foreign investors back. However, we see increasing political risk in Mongolia as the ruling party faces growing challenges which could possibly weaken its ability to pass legislation as well as the continuity of any policy it implements. This has led us to downgrade the country's short-term political rating from 70.4 to 68.3.
Growing Unrest May Sway Coalition Partners, Weakening DP's Mandate
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