Mongolia Economy Overview (3)
The first signs of improvement (stop of the Tugrug decline, more foreign investments, higher economic growth) can already be seen. The Asian Development Bank also certifies that Mongolia is booming.
In the first eleven months of 2018, Mongolia recorded economic growth of 6.4 percent, the unemployment rate fell to 6.9 percent, and the inflation rate rose to 8.1 percent.
However, the ongoing government crisis has put a damper on the hesitant economic upturn.
The tugrug fluctuates against the USD, in October 2019 the Mongolbank quoted the official dollar rate at 2,671.60 tugrug, in December 2020 at 2,849.48.
In the World Bank report “Ease of doing Business” 2020, Mongolia ranks 81st out of 190 countries.
The Mongolian economy has been winning since 2019 moving again. While real economic growth was 6.9 percent in 2018, it reached 8.6 percent in the first quarter of 2019 and 7.3 percent in the first half of the year. However, after the slump due to the Covid-19 pandemic since the beginning of 2020, the Mongolian economy will gradually recover in 2021 at the earliest.
The IMF assumed growth of 6.3 percent for the whole of 2019, the World Bank of 7.2 and the Mongol Bank expected growth of 6.9 to 7.3 percent.
The main reasons for the positive economic development were higher raw material prices and more foreign investments.
Even Germany Trade & Invest (GTAI) certified Mongolia in economic outlook from February 2020 a further stabilization of the economy.
According to the World Bank, the poverty rate fell from 29.6 percent in 2016 to 28.4 percent in 2018.
However, the corona crisis is making Mongolia difficult.
According to mathgeneral, the government decided on an aid package for businesses and the population in March 2020, but is it enough?
In November 2020 the inflation rate was 3.5%, unemployment 7.3% and economic growth minus 7.3%.
On May 13, 2020, the Grand State Assembly approved the guidelines for Mongolia’s long-term development policy with “Vision – 2050”.
The document combines the history of the Mongolian Empire, the nomadic culture and national peculiarities with modern developments and international conditions.
General national values, human development, quality of life, economy, “good governance”, environmental and nature protection, peace and security, regional development, the development of Ulaanbaatar and the satellite cities were taken into account.
The perspective plan is to be implemented in three stages: 2021-2030, 2031-2040 and 2041-2050.
One goal is to overcome the still existing dependence on the raw materials industry.
This requires the development of the infrastructure, the energy sector, different forms of tourism, the promotion of small and medium-sized enterprises, knowledge transfer and application based on a creative economic policy and further expansion a manufacturing heavy, light and food industry.
As a result of the implementation of the plan, an increase in GDP per capita to USD 12,000 in 2030 and to USD 38,000 in 2050 is expected.
Furthermore, it is planned to convert Mongolia into an industrial goods export country, into an equal competitor in the Asia-Pacific region.
One of the most important projects of the Mongolian government’s development policy for the next 30 years is the development of the infrastructure.
This includes the construction of the 414.6 km long railway line between Zuunbayan and Tavantolgoi. 100 km could be completed by November 30th, and the entire route is to be inaugurated by 2022.
In the ranking of the most powerful digital economies in the world, which is published annually by the International Institute for Management Development (IMD) in Lausanne, Mongolia was ranked 62nd out of 63 countries in 2020, as in 2019.
Factors such as knowledge, technologies (broadband), preparation for the future and cyber security are included in the assessment.
In terms of smartphone use, Mongolia ranks 6th, while cybersecurity only ranks 63rd.
On June 21, 2019, the National Statistical Office and the World Bank published their joint poverty report for 2018.
According to this, 904,000 of the 3.2 million citizens of Mongolia lived in poverty. The poverty rate fell to 28.4 percent, 1.2 percent less than in 2016.
While the risk of poverty is falling in rural areas, it is increasing in urban settlements.
Two thirds of the Mongolian population now live in cities or town-like settlements.
In rural areas, the poverty rate fell by 4.1 percent between 2016 and 2018, and in urban centers it rose by 0.1 percent.
40 percent of the poor lived in Ulaanbaatar at the end of 2018.
From a regional perspective, the poverty rate in the eastern region fell by 6.6 percent, by 4.3 percent in the western region, by 2.7 percent in the Khangai region and by 0.7 percent in the central region.
In Ulaanbaatar, on the other hand, it rose 1.1 percent.
The poverty rate is highest in the Gov’sumber-Aimag: 51.9 percent of the residents are considered poor, followed by the Gobi-Altai-Aimag (45.1 percent), Dornod (42.5 percent) and Khovd (40.9 percent)).
The South Gobi Aimag shows the lowest poverty rate: 11.8 percent.
Monthly consumption per capita reached 279,912 Tugrug in 2018, 3.2 percent more than in 2016 (269,328 Tugrug).
Per capita consumption in rural regions rose by 5.4 percent, and in urban centers by 3.7 percent.
In 2016, people affected by poverty had 146,145 Tugrug available per month, compared to 166,580 in 2018.
Although the poverty rate has fallen, the risk of poverty has risen for many people, observers assume that the 904,000 poor could add another 475,000 in the future.
Although the economy has been recovering since 2017, the risk of falling into poverty remains high. The prosperity from the mining of natural resources and the high level of foreign donations do not benefit all Mongolians.