The National Statistics Office just released the annual GDP growth rate for 2014-2015, and it’s not pretty. In 2015, the economy grew by 2.5%, which is a far cry from the 15.3% that we had in 2011, or even the 5.9% that we had in 2014. But it’s nowhere what it was in 2009.
In 2009, Mongolia’s GDP contracted 2.7% as the global financial crisis roiled markets. As a small, developing country with an economy heavily dependent on minerals, Mongolia is highly sensitive to international markets. But it is probably more sensitive to Chinese markets. It seems that a sneeze in Beijing turns into a cold in Ulaanbaatar.
According to China, their economy grew by 6.9% in 2015. That may actually mean something to a few, but not for big global investors – who are making decisions with assumptions closer to the tune of 5%, or even 4%.
Mongolia has to make their decisions based on those same assumptions. There’s little that we can do to affect China or global commodities markets, but there’s a lot we can do to clean up house. Foreign direct investment, which can help drive the economy even with financial markets down in other areas, continued to fall. In 2015, it fell 39% from $381.9 million in 2014 to $232 million. A major impediment to FDI is “political instability.” If I was a global investor, watching parliamentary members change inputs into an excel sheet like high school students in their first finance class is probably not going to give me a large impetus to put all my money there.
As markets continue to ache through the year, we will probably not see higher growth rates until 2017. The World Bank is anticipating a growth of 0.8% in 2016, and 3% in 2017.
Macongolia: Observations of Mongolia 