WASHINGTON DC, May 21, 2009 – The World Bank’s Board has endorsed a new strategy of support for Mongolia as the country comes to terms with the short and long-term impacts of the global economic downturn.
A new interim strategy, approved today, provides a framework of support for the next 18 months while economic conditions in Mongolia stabilize. Its goal is to support the Government of Mongolia to address urgent crisis needs while also addressing longer term reforms needed to reduce the impact of future shocks.
It focuses on three key areas: improving fiscal sustainability in a mineral-based economy; protecting the poor and vulnerable; and encouraging transparent and prudent mining investments and a more competitive and stable medium-term business investment climate.
Since the country’s 1990 transition to a market-based economy, Mongolia has seen considerable development success, with gross national income per capita increasing from $US390 in 1995 to $US1,290 in 2007.
But late last year, after a sustained period of rapid economic growth propelled by high mineral prices, the country entered a steep economic downturn. Sharp drops in the price of Mongolia’s export commodities, particularly copper, led to major declines in government revenues. As a result, Mongolia has been among East Asia’s hardest hit countries by the global economic crisis.
Growth is projected to slow from 9.0 percent in 2008 to 2-3 percent in 2009 and the external current account swung from a surplus of 4.4 percent of GDP in 2007 to a 9.6 percent deficit in 2008.
Poor and vulnerable groups are especially at risk due to rising unemployment, declining prices for raw materials in the livestock sector and recent inflation. The Government has responded with an ambitious short-term macroeconomic program to navigate impacts of the global crisis and begun to put in place policy reforms to make the economy more resilient in the medium-term.
Arshad Sayed, World Bank Country Manager for Mongolia said: “The global economic crisis has highlighted some key areas of vulnerability for Mongolia. This strategy will help the country deal with the short-term crisis that is especially hitting the country’s poorest people while also working towards a more sustainable economic future.”