Economy is overly dependent on Chinese demand for copper, coal and other resources, critics of government policy argue.22 March 2016
Many in this country of three million people that is almost four times the size of California risk being dragged below the poverty line again as the economy sinks.
Mongolia’s economy has been poleaxed by China’s slowdown, which has unleashed a flood of commodities onto global markets, The Wall Street Journal says.
Few developing countries have seen their hopes so adversely affected by the commodity price slump, and many Mongolians now face a future laden with debt. All this is a far cry from a few years ago when “Minegolia’s” vast and unexploited reserves of copper, coal, and other minerals were estimated to be worth more than $1 trillion, the WSJ says.
With its neighbor China experiencing a belated industrial revolution, Mongolia looked to have won a ticket into the modern world, the paper says.
But the contagion caused by China’s economic tailspin has exposed Mongolia’s overreliance on the commodity sector, Economywatch.com commented, while its mining production volumes have failed to yield a stable return in recent years, further contributing to economic stagnation.
“Mongolia has been successful in reducing poverty, but living standards could decline if leaders cannot find a way to solve long-term issues that plague the economy,” Economywatch says.
- In 2011, Mongolia was the world’s fastest-growing economy, expanding by more than 17 percent. The prime minister at the time, Sukhbaatar Batbold, forecast in the following year that the country could keep growing at that rate for the next 10 years.
- The expectation was that the mining boom would enrich the nation enough for it to be able to invest in vital infrastructure projects, the WSJ says. Yet Mongolia failed to make progress on key projects before the commodities boom ended, and nowhere is the problem more acute than in the capital Ulaanbaatar – with its overcrowded hospitals and a lack of basic amenities such as running water.
- Prime Minister Chimediin Saikhanbileg has been strongly criticized for taking a conciliatory approach towards mining companies, with some Mongolians concerned that their activities could damage the nation’s natural habitat and disturb valuable archeological sites.
- Between 2013 and 2015, the only minerals-rich developing countries that recorded a sharper economic downturn were those ravaged by conflict or epidemics: South Sudan, Sierra Leone, and Ukraine, the WSJ says. In January, the World Bank cut its growth forecast for Mongolia to just 0.8 percent.