Population: 2.8 millions (2013 est.)
Area: 1,564,116 km2
Capital: Ulaanbaatar (population 1,3 millions) (2013 est.)
GDP (2013) : 11.52 billion USD
GDP composition by sector (2013 est.) :
GDP Annual Growth Rate (2013) : 11,7%
GDP per capita (2013): 1631
USDInflation rate: 12% (2013)
Exchange rate depreciation (2013): 20%
In recent years Mongolia has become one of the most rapidly expanding economies in the world. It was one of the top performers in 2013, with economic growth of 11.7%, and it is projected to be the second top-performing economy in 2014, only after South Sudan (about 15%).
The main driver of this rapid economic expansion has been the mining industry’s development. Mongolia is richly endowed with natural resources. With increasing commodities prices in the world market for the past 15 years, the mining sector’s share in GDP increased from 14 to 25 %. Mongolia’s main export commodities are copper, gold and coal, and Mongolia is now one of the major coal exporters to China.
Moreover, it is expected that during the next five years major mining projects of copper (Oyu Tolgoi project) and coal (Tavan Tolgoi project) will reach their full potential, likely further increasing economic expansion. According to some estimates, Mongolia’s GDP could reach US$25 billion by 2020, which is 2.5 times the size of today’s economy.
These developments haven’t gone unnoticed in the world market. Mongolia has become one of the most attractive economies for investors. In 2013 alone the Mongolian government sold US$1.8 billion of bonds in world markets, which is a testament to the strong upside expectation of the economy.
However, the Mongolian economy faces serious challenges to reach its full potential and take advantage of the mining boom’s opportunities. Since Mongolia is becoming increasingly dependent on the export of raw minerals, world price fluctuations for commodities have destabilizing effects on the nation’s economy.
Since the country desperately needs to develop and expand its infrastructure to promote economic diversification, the government has found it hard to resist spending more. Its efforts in raising capital by issuing bonds in foreign and domestic markets, and spending it through the newly established Development Bank of Mongolia (DBM), have undermined the spirit of the Fiscal Stability Law. At the end of 2013, budget deficit was at 8 per cent of GDP and the overall debt level already exceeded the limit of 40 per cent of GDP set out by the law.
While the Mongolian government finds itself maintaining increasingly expansionary fiscal policies, the Bank of Mongolia (the central bank) is simultaneously undertaking expansionary monetary policy by extending more credit to government and commercial banks. As a result, in 2013, inflation reached 12 per cent and the exchange rate depreciated more than 20 per cent.
In contrast to previous years, the terms of trade depreciated by 15 per cent in 2013. Subsequently, the current account deficit for the year reached US$3 billion, or 28 per cent of GDP, and foreign direct investment decreased by 48 per cent. Significant foreign investments in mining, banking and other strategic industries remain subject to special government approval.
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