Over the past 25 years, Mongolia has transformed into a vibrant democracy, tripling its GDP per capita since 1991. Primary school enrollments are at 97%, coupled with impressive declines in maternal and child mortality (45 and 17 per 1,000 live births, respectively, in 2017). With vast agricultural and mineral resources and an increasingly educated population, Mongolia’s long-term development prospects are promising.
Mongolia’s economy has recovered strongly from the brink of a macroeconomic crisis in 2016, but underlying vulnerabilities remain. The economy grew by 7.3 percent in the first half of 2019 and 7.2 percent in 2018, compared to 1.2 percent in 2016. Growth has been driven primarily by robust private consumption, strong foreign direct investment (FDI) inflows, and a revival in mineral exports. Skillful economic management by the government has also contributed to this strong economic recovery. The country’s fiscal stance has improved substantially as the deficit declined from 15.3 percent of GDP in 2016 to a surplus of 2.6 percent in 2018 and 3.4 percent in January-July 2019. Substantial improvements in the fiscal balance contributed to the sharp reduction in government debt in 2017-18. Growth outlook remains positive in 2019 and beyond, mainly driven by private consumption, and mining sector investment. Despite a positive outlook, prudent economic management should continue. Risks to the outlook include political uncertainty, commodity price shocks, cross-border bottlenecks, implementation delay of mega projects, and slower implementation of banking sector reforms.
During the economic boom experienced after 2010, poverty fell rapidly, but in 2016, as investment and private consumption slowed, Mongolia’s poverty rate rose again to the level of 2012 and has remained stagnant. The national poverty rate of Mongolia was estimated at 28.4 percent in 2018. Little progress in poverty reduction despite the robust economic rebound in the past two years is primarily due to low wages and self-employment income growth, a significant depreciation of the Mongolian tughrik, as well as increased consumer price inflation in the past three years. In addition, further 14.9 percent of the total population live in “near” poverty (between the poverty line and 1.25 times the poverty line) which makes them especially vulnerable to negative shocks. Mongolia’s poverty concentration continued to grow in urban areas. During the period between 2016 and 2018, the poverty rate declined by 4.1 percentage points in rural areas while it remained unchanged in urban areas where two-thirds of the population live. The share of the poor living in urban areas has increased from 55.2 percent in 2010 to 63.5 percent in 2018, and overall more than 40 percent of Mongolia’s poor lived in Ulaanbaatar in 2018. In the coming years, fiscally sustainable labor and poverty-targeted social protection policies coupled with a positive economic outlook will be key to reducing poverty.
To ensure sustainable and inclusive growth and to reduce poverty, Mongolia will also need to strengthen governance; build institutional capacity to manage public revenues efficiently; allocate its resources effectively among spending, investing, and saving; and ensure equal opportunities to all its citizens in urban and rural areas. It needs to do this in an equitable and environmentally friendly manner.
In 2016, the World Bank Group celebrated the 25th anniversary of Mongolia’s membership in the World Bank, IDA, and IFC.
Last Updated: Oct 10, 2019