Economic stakes
Mongolia is the4th richest country in terms of natural resources and livestock. Its mining, agri-food and tourism sectors have strong development potential. Landlocked between the two giants of China and Russia, Mongolia is currently seeking to diversify its economic partners through its "third neighbor" strategy, which refers to its willingness to trade with other democratic and developed countries such as France, Japan and the United States. In this way, it is seeking diversification solutions to preserve its economic independence from Russia and China, the latter nevertheless remaining its leading trading partner, absorbing 90% of its exports.
In 2017, Mongolia experienced a severe liquidity crisis and was forced to turn to international aid. Faced with falling commodity prices, slowing Chinese growth and an increasing public deficit - which represented 90% of the country's GDP in 2016 - the risk of the country defaulting on its debts increased. In the wake of this crisis, the Mongolian economy weakened again with the onset of the Covid-19 epidemic in 2019. The restrictive measures slowed the economy sharply, with GDP falling by 10.7% in the first quarter of 2020.
By 2021, the IMF has nevertheless announced a rebound in activity, with growth at 5.2%, while public debt is being reduced. The year 2023 was marked by economic recovery, thanks in particular to coal mining and exports, which reached unprecedented levels. Public debt fell sharply to just 44% of GDP by the end of 2023. In the coming years, the challenge will be to diversify the country's trading partners and economic sectors.
Agri-food sector. While Mongolia's livestock population has increased significantly, now standing at 66 million head, it remains dependent on the country's climatic conditions and increasingly frequent züd pests. The agri-food sector is undergoing a complete overhaul. It suffers from under-investment by the government, but the authorities are seeking to raise the price of livestock products, particularly cashmere, in order to reduce the size of the herds. More and more responsible cooperatives and chains are promoting a sustainable economic system to counter the effects of overgrazing, which is responsible for the desertification of the steppes.
Tourism sector. In 2019, tourism was one of the pillars of the Mongolian economy. However, it was severely impacted by the health crisis, with the country completely closing its borders and imposing severe restrictions from the start of 2020. After losses estimated at 15,000 billion tugriks and the jeopardizing of 1,600 businesses and 88,000 jobs, the government decided to reopen the country at the beginning of 2022 and ease entry conditions to revive its tourism sector, greatly weakened by the pandemic. In 2023 and 2024, these efforts bore fruit, and Mongolia recorded a sharp rise in visitors: the number of foreign travelers increased by 73% in 2023 compared with the previous year, and continues to grow in 2024.
Mining sector. With over 6,000 deposits of 80 different metals, Mongolia's subsoil represents a crucial financial windfall for the country. The country's colossal reserves of raw materials make the mining sector central to the Mongolian economy, but also dependent on metal prices. The Oyu Tolgoi "Turquoise Hill" mine in the Gobi Desert alone accounts for around 30% of Mongolia's GDP, and is set to become the country's4th largest copper mining site by 2030. After years of dispute, underground mining began in March 2023. The site had been the subject of controversy over profit-sharing and environmental impact. It had also crystallized tensions within the Mongolian population, worried about the increasing power of foreign firms coming to exploit the country's mining resources.
The development of this gigantic deposit should help boost exports. However, it also poses environmental problems: mining pollutes rivers and has consequences for biodiversity. The distribution of the wealth produced is also a major issue for the country: foreign investment only benefits a minority of Mongolians, while foreign companies are massively enriched. In 2013, a law was passed limiting foreign investment in the mining, telecommunications and banking sectors to 49%. Today, a third of Mongolia's population still lives below the poverty line.
Political situation
On January 13, 1992, Mongolia established a parliamentary democracy and put an end to the one-party system. Legislative power is vested in the State Great Hural, a 76-seat parliament elected by direct universal suffrage for a 4-year term. Parliamentarians elect the Prime Minister and his government, who hold executive power. The President of the Republic, head of the armed forces and responsible for defense and foreign policy, is elected by direct universal suffrage for a single six-year term.
Since the 1990s, Mongolia has suffered from political instability, with successive governments staying in power for an average of just one and a half years. Promulgated in November 2021 and coming into force in March 2022, a constitutional amendment should bring greater political stability by strengthening the powers of the Prime Minister and the independence of the judiciary, but it does not settle the debate on the question of possible regime change.
Recent decades have confirmed the bipolarity of the Mongolian political system: the two major parties - the Mongolian People's Party (PPM), founded in 1921, and the Democratic Party - have alternated in power since 1992. The PPM won the last parliamentary elections in June 2024 and the presidential elections in June 2021, despite a political crisis linked to the management of the health crisis. This forced Prime Minister Ukhnaagiin Khürelsükh, a member of the party, to resign in January 2021. Finally elected President of the Republic a few months later, he had to face up to issues such as the corruption affecting political life and the distribution of mining revenues to reduce inequalities within the population.
Faced with rural exodus and urbanization
For several decades, Mongolia has been experiencing a rural exodus that is emptying its steppe and saturating its capital. In 1998, Ulaanbaatar had a population of 650,000. By 2021, its population had almost tripled to 1.64 million. These major population shifts are caused not only by the country's economic liberalization, but also by the repeated züds that hit the steppes, accentuated by global warming. In the winter of 2010, a cold snap hit almost 90% of the country, bringing temperatures down to -50°C and killing 8 million animals. In 2015, 2017 and 2018, other devastating züds decimated entire herds.
Sedentarization. Extreme weather conditions are forcing nomads to abandon their ancestral way of life. After losing most or all of their livestock, thousands of them - 20,000 every year - flock to Ulan Bator in search of work. Settled in their sheds on the outskirts of the city, they contribute to the demographic explosion of an under-equipped capital.
Ulaanbaatar is struggling to keep up with the rapid pace of urbanization. For many, the yurt districts have no electricity or running water. In 2012, they accounted for around 62% of the city's total population. Unemployment hovers around 60%, bringing with it delinquency, crime, poverty and prostitution. Inhabitants heat their homes with coal, causing major pollution peaks. In 2016, Ulaanbaatar became the world's most polluted capital, ahead of Beijing!
Urbanization. Major urbanization projects are underway to combat pollution, overpopulation and traffic jams. By 2030, the government hopes to have commissioned a wastewater treatment plant and new public transport lines, renovated the yurt district, diversified heating sources and improved home insulation. These projects involve international donors and aim to improve the living environment of Ulaanbaatar's inhabitants.
