The Economy of Mongolia: more than mines and horses

Extreme climate, short and intense summers, winters with -40º C, forge the character of an almost deserted country: it is one of the less populated in the world, with a population density about 2 inhabitants per squared km.

More than a third of the total population lives in Ulaan Baatar (more than a million of the total 3 million, rounded numbers).

Located between China and Russia, Mongolia looks to the future with the pride of its imperial past and the optimism of being one of the fastest grower economies in the last few years, but with the uncertainty of an irregular growth, the dependence of its minerals and mining and an unemployments levels high compared with the rest of the region.

It is difficult to talk about Mongolia without using the topics: nomad country, almost in the dark age, horses, steppes, eagles and falcons and of course, the Mongol Empire (the second largest in history, just after the British Empire). Mongolia is usually forgotten when speaking of Asian economies.

The Economy of Mongolia was one of the fastest-growing in the world. With a growth above 14%, but losing momemtum in the last few years

 

In 2012-2013 Mongolia was the second fastest growing economy, but since then, it has experienced a lot of up and downs. With a GDP per capita around 4.000 $ per year there is a lot of room of improvement. Inflation has suffered a lot of up and downs too, with rates of 40% in some years and 10% in 2014.

A clear example of the Ducth disease

The mining sector has experienced a enormous growth in the last few years. Despite the good consequences (GPD growth, declining rate of poverty) a growth based in raw materials can have negative consequences too. It is the effect known as “Dutch disease”: mining sector exportations causes money apprecitations with makes the rest of the exportations less competitive.

 

A digital future for the Economy of Mongolia?

Telco in Mongolia is a real complex subject: the low population density and a dominant nomadic lifestyle makes landline conectivy really dificult (Internet penetration is below 18%). But mobile connections are normal: 100% mobile penetration.

In the index “Measuring the Information Society Report 2014” by International Telecommunication Union, Mongolia is ranked 92/166.

Startup and digital scence is small, but not inexistent. A typical thing we can hear:

 

“Here there is no VC, banks don’t finance us, government does not help and market is small. But there are people with passion”

 

5 facts to remember

• Population density in Mongolia is 5th lowest in the world.
• Mining represents 20% of the GDP in Mongolia. Oyu Tulgoi could generate more than 20.000 $ million.
• In 2012-13 Mongolia was the second fastest growing economy.
• 80% of Mongolian exports go to China.
• Population below poverty line has decreased 17 pp between 2010-2014.