Economy in Mongolia

by Nomin

Mongol banknotes

Mongol banknotes

When the economy in Mongolia transitioned into a marketeconomy, the inflation rose in the

early 90’s to a maximum of 325.5%, which led to shortage of necessary daily products. But in the
second half of the 90’s the economical state gradually became stable. To further stabilize the
economy and to enforce a peaceful change of society, a sound economic policy has been set up
(IMF Working Paper 2003).

But not all the consequences are positive. As a consequence of the
switch to capitalism, it is estimated there are 30.000 beggars in Mongolia, who are called the kids
of the street. The current big problem of the capitalism in Mongolia is the unevenness of wealth.
After private ownership of land is allowed in 2004, the inequality has become even worse. Right
now, the worth of Mongolia’s important export products like copper is in a rising trend in the LME
(London Metal Exchange) and will further increase the development of the Mongolian economy.
The national amount of influx must be distributed, for this will have a great influence on the
economical future of Mongolia.

Mongolia’s economy is mainly centered on agriculture and especially mining. Mongolia has rich
mineral resources, and copper, coal, molybdenum, tin, tungsten, and gold account for a large part
of industrial production. The majority of the population outside urban areas participates in
subsistence herding; livestock typically consists of sheep, goats, cattle, horses, and Bactrian
camels. Agricultural crops include wheat, barley, potato, vegetables, tomato, watermelon, seabuckthorn
and fodder crops. GDP per capita in 2006 was $2,100.

Although GDP has risen steadily
since 2002 at the rate of 7.5% in an official 2006 estimate, the state is still working to overcome a
sizable trade deficit. A massive ($11 billion) foreign debt to Russia was settled by the Mongolian
government in 2004 with a $250 million payment. Despite growth, the proportion of the population
below the poverty line is estimated to be 35.6% in 1998, 36.1% in 2002-2003, 32.2% in 2006, and
both the unemployment rate and inflation rate are relatively high at 3.2% and 6.0%, respectively
(in 2006).

Industry currently accounts for 21.4% of GDP, approximately equal to the weight of the
agriculture sector (20.4%). These industries include construction materials, mining (coal, copper,
molybdenum, fluorspar, tin, tungsten, and gold), oil and beverages, processing of animal products,
and cashmere and natural fiber manufacturing. The industrial production growth rate is estimated
to be 4.1% in 2002. Mining is continuing to rise as a major industry of Mongolia as evidenced by
number of Chinese, Russian and Canadian firms opening and starting mining business in
Mongolia. Domestic food production, especially packaged food production has been increasingly
coming up with speed with investments from foreign companies.

For the young people in Mongolia reorganization is needed to handle the problem of poverty.
The reorganization has been fulfilled, now it should concentrate on the poverty. To handle this
problem it should find an appropriate model of success. The long-term international market
circumstances are very optimistic. Mongolia has many underground resources and in 10 years
there will be a worldwide war on resources.

Furthermore both America and China are keeping a
close eye on the central location of Mongolia. Because it is located between the two powerful
countries Russia and China, America could keep these countries in check from Mongolia.
Mongolia should use these good points for their development and not waste it on consumption.

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