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Economy of Mongolia

Given its small, open economy with abundant resources, Mongolia faces the same boom-and bust cycles of any resource-dependent nation (Oxford Business Group, 2015). The country has the natural endowments to provide opportunities for its over 3 million citizens. However, managing fluctuating growth rates, ranging from -1.3% in 2009 to 17.3% in 2011, as well as investment, trade and fiscal revenues, remains a key challenge. Economic growth in Mongolia decelerated sharply in 2015, but so did inflation, and the current account deficit narrowed. Growth stagnates in 2016 under lower mining output and necessarily tight macroeconomic policies. Inflation will dip further before climbing again in 2017. 21.6% of the population lives below the national poverty line (ADB, 2016). While between 1994 and 1998 poverty appears to have stabilized, the depth and severity of poverty has increased, and the inequality gap between people has widened. Gini coefficient for Mongolia has increased from 32.9 percent in 2002 to 36.5 percent in 2013 (IMF, 2013), indicating increased income inequality.

Mongolia’s economy, fueled by a mining boom, grew at a record 17.5% pace in 2011 and slowed to 12.5% in 2012. In 2013, Mongolia’s economy grew by 11.7% GDP per capita at current prices reached MNT 6053.8 thousand and according to the World Bank Atlas method was USD 3,964 in 2013 (National Statistical Office, 2013). Number of livestock reached 45.1 million heads for the first time in history, of which horse was 2.6 million heads, cattle was 2.9 million, camel was 0.3 million, sheep was 20.1 million, and goat was 19.3 million heads. The socio-economic transformation started since 1990 in Mongolia has changed livelihood of rural population which in fact has an effect on environment. One of the consequences of this change is continuously growing number of a livestock and increase of number of goat in herd structure. Researchers concluded that in 2000s only 20% of total pasture land were degraded, whilst in 2010 this number increased to 70% of total pastureland (IFAD, 2010).

Mongolia's GDP grew in double digits until 2013. It fell to 3.5 per cent in 2015 and is projected to have zero growth in 2016, impacting on the government’s revenues and requiring reduced expenditure. Agriculture (primarily herding), once the mainstay of the Mongolian economy, continues to decline in terms of share of national employment and contribution to GDP. In 2014, less than 30 per cent of the workforce was employed in agriculture, down from 42 per cent in 2007. Agriculture comprises about 16 per cent of GDP, while services alone account for nearly 50 per cent of GDP and 56 per cent of national employment. Industry is estimated to account for 37 per cent of GDP (including mining with 19 per cent). Mongolia's mining sector continues to grow strongly, and approximately 90 per cent of Mongolian exports are resources, notably copper, gold and coal. The Mongolian economy is heavily reliant on foreign capital inflows. In the next five years, mining-related foreign investment in coal, copper and gold is forecast to exceed US$10 billion, roughly equivalent to Mongolia's 2012 GDP (current prices). This far exceeds ODA levels of $108mil in 2014, declining from $149 in 2013.

Mongolia is ranked 56 out of 189 countries on the World Bank's 2016 Ease of Doing Business index, up 30 places since 2012. China is Mongolia's largest trading partner, accounting for around 89 per cent of Mongolia's merchandise export revenues (predominantly through the export of copper and coal), and 37 per cent of merchandise import expenditure.

The Mongolian Government confronts major challenges in managing a growing economy, large-scale foreign investment and the rising expectations of Mongolian citizens. Mongolia’s greatest development challenge will therefore be to transform the benefits of the mining boom into equitable, inclusive and sustainable development for its entire population. Much of this endeavor will depend on the authorities’ will and capacity to improve its governance institutions in order to ensure transparent and accountable management of its mineral resource revenues. Mongolia became the first country to join the Partnership for Action on Green Economy (PAGE) in 2013, determined to place sustainability at the center of its economic policies. In 2014, the Parliament of Mongolia approved the National Green Development Policy and in January 2016 it approved an Action Plan to implement it. PAGE has since been helping the government unite and align national and international, public and private finance and investment players, supporting them in their efforts to give the Action Plan legs. The initiative will develop green and inclusive financial products and services, such as green bonds, to direct private finance towards projects that benefit the society and the environment. PAGE is working with the banking sector, the Mongolian Sustainable Finance Initiative and the UN Environment Finance Initiative to identify the opportunities for boosting green finance. Under PAGE and the GGGI partnered with the government of Mongolia to prepare guidelines develop the design and prototype for green school buildings.