Mongolia’s economy depends heavily on the export of commodities, making it vulnerable to fluctuations in the global market. Especially, after the discovery of major deposits in the early 2000s, the country has been becoming more and more reliant on its commodity sector. Today, mining accounts for nearly one-quarter of GDP, up from one-tenth in 2000.
Mining industry share of GDP in percentage
Mining share of total export in percentage
Source: The Mongolian Ministry of Mining and Heavy Industry
Mining influence in Mongolia’s economy
Source: The World Bank, NSO
Benefits from minerals saw significant growth in recent years, placing Mongolia relatively high, compared to other countries
Source: The World Bank
Mongolia is exporting over 14 types of minerals, with China being its largest single importer.
Fitch Solution pointed out that the main risk to Mongolia’s economic outlook is the potential for any unexpected slowdown in China’s economy which currently purchases more than 90% of Mongolia’s largely mineral-based exports. The major positive development for Mongolia in recent months is mainland China’s shift away from its Covid-zero policy.
Another highlighted issue is the inefficient allocation of assets earned from mining revenues. Mongolia has not only consumed almost all its mineral earnings but has also borrowed heavily against them, passing on negative wealth to the next generation. According to the World Bank, out of every dollar generated from mineral wealth in the last 20 years, Mongolia has consumed 99 cents and saved only 1 cent through its Stabilization and Future Heritage Funds. They concluded that the use of mineral revenue was mostly determined by political convenience, not economic merit.