Industry Trend Analysis - Ulaanbaatar Residential Construction Foundation Of Growth Forecast - SEPT 2017

BMI View: Residential buildings construction, especially in Ulaanbaatar, will be a long-term driver of growth in Mongolia ' s construction industry and provide a source of stability against fluctuating levels of investment in mining and infrastructure.

We expect that Mongolia's construction industry will bounce back from its contraction in 2016, as demand for residential buildings remains strong, the mining sector outlook improves and work proceeds on a number of large-scale transport and power utility projects. Having incorporated new data into our models, we highlight that residential and non-residential real estate in the capital of Ulaanbaatar will remain a foundational driver of growth in the construction sector. Over our 10-year forecast period, growth in this segment will help moderate the more volatile investment and construction patterns in the mining and infrastructure sectors. Residential building accounted for around 50% of total construction activity in recent years and we expect this proportion to be maintained as more people move to Ulaanbaatar, where around half of the national population already lives.

Real growth in Mongolia's construction industry will reach 7.4% in 2017 and 6.8% in 2018, which are slight downward adjustments from our previous forecasts. We are now also able to forecast sector growth within the construction - the residential construction segment will outperform, growing by 8.5% in real terms in 2017 and at an annual average of 6.3% between 2017 and 2021, while currently robust growth in the infrastructure segments will taper off after 2021 as transport and power projects are completed.

Growth Rebounding
Mongolia - Construction Industry Growth and Value Forecasts
f = BMI forecast. Source: Mongolian National Statistical Office, BMI

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