Mongolia’s Heavy Reliance on its Mining Industry: Bane or Boon?

CEIC News@lert: Mongolia’s abundance of natural resources, such as coal and gold, has boosted the country’s economy tremendously in recent years. The Mongolian Gross Domestic Product increased by 34.39% between 2007 and 2011 (representing a 7.67% compound annualized growth rate) to MNT 4.89 trillion. The country’s mining output has been growing rapidly and surpassed that from the agricultural sector in 2010, acting as the main growth propeller of the Mongolian economy. In 2011, the Mongolian mining industry accounted for 16.17% of GDP compared to 13.5% for the agricultural sector, a visible drop from 20% in 2009. As of end 2011, the mining and quarrying sector was the main contributor to the country’s GDP with about MNT 791 billion, followed by the agriculture, forestry and fishing sector (MNT 661 billion) and the transportation and storage sector (MNT 536 billion).
   However, the slowdown in the Chinese economy is expected, in turn, to hurt the Mongolian economy in the coming quarters, as China is Mongolia’s largest trading partner. China accounts for almost 90% of Mongolia’s total export revenue in 2012, of which the bulk of its exports are mining-related. Mongolia’s trade with China may drag its economic growth down as China reduces its imports of mineral products from Mongolia. In November 2012, Mongolia’s mineral product exports decreased by 33.4% year-on-year to USD 322 million. The Mongolian vice-minister for economic development expects the Chinese market to recover in five to ten months. However, this is still highly uncertain, pending the resurgence of the global economy as a whole.