Economy of Mongolia - Crisis To Present Day

Crisis To Present Day

Mongolia’s reliance on trade with China meant that the worldwide financial crisis hit hard, severely stunting the growth of its economy. With the sharp decrease in metal prices, especially copper (down 65% from July 2008-February 2009, exports of its raw materials withered and by 2009 the stock market MSE Top-20 registered an all-time low since its dramatic spike in mid-2007. Just as the economy started to recover, Mongolia was hit by a Dzud over the winter period of 2009-2010, causing many livestock to perish and thus severely affecting cashmere production which accounts for a further 7% of the country’s export revenues.

According to the World Bank and International Monetary Fund estimates, real GDP growth reduced from 8% to 2.7% in 2009, and exports shrunk 26% from $2.5Bn to $1.9Bn after a promisingly steady increase up until 2008. Because of this, it was projected that between 20,000 and 40,000 fewer Mongolians (0.7% and 1.4% of the population respectively) will be lifted out of poverty, than would have been the case without the global financial crisis.

In late 2009 and the beginning of 2010, however, the market has begun to recover once again. Having identified and learnt from its previous economic instabilities, legislative reform and a tightened fiscal policy promises to guide the country onwards and upwards. In February 2010, foreign assets were recorded at USD1,569,449 million. New trade agreements are being formed and foreign investors are keeping a close eye on the "Asian Wolf".

Mining is the principal industrial activity in Mongolia, making up 30% of all Mongolian industry. Another important industry is the production of cashmere. Mongolia is the world's second largest producer of cashmere, with the main company, Gobi Cashmere, accounting for 21% of world cashmere production as of 2006.