Economy of Mongolia

The economy of Mongolia has traditionally been based on agriculture and livestock. Mongolia also has extensive mineral deposits: copper, coal, molybdenum, tin, tungsten, and gold account for a large part of industrial production. Economic growth picked up in 1997-99 after stalling in 1996 due to a series of natural disasters and increases in world prices of copper and cashmere. Recently, the Mongolian economy has grown at a fast pace due to an increase in mining and Mongolia attained a GDP growth rate of 11.7% in 2013.

Top Sectors in Mongolia

Agriculture in Mongolia

Agriculture in Mongolia constitutes over 10% of Mongolia's annual gross domestic product and employs one-third of the labor force. However, the high altitude, extreme fluctuation in temperature, long winters, and low precipitation provides limited potential for agricultural development. The growing season is only 95 - 110 days. Because of Mongolia's harsh climate, it is unsuited to most cultivation. The agriculture sector therefore remains heavily focused on nomadic animal husbandry with 75% of the land allocated to pasture, and cropping only employing 3% of the population.

Telecommunications in Mongolia

Telecommunications in Mongolia face unique challenges. As the least densely populated country in the world, with a significant portion of the population living a nomadic lifestyle, it has been difficult for many traditional information and communication technology (ICT) companies to make headway into Mongolian society. With almost half the population clustered in the capital of Ulaanbaatar, most landline technologies are deployed there. Wireless technologies have had greater success in rural areas. Mobile phones are common, with provincial capitals all having 4G access. Wireless local loop is another technology that has helped Mongolia increase accessibility to telecommunications and bypass fixed-line infrastructure. For Internet, Mongolia relies on fiber optic communications with its Chinese and Russian neighbors.

Health in Mongolia

Modern Mongolia inherited a relatively good healthcare system from its socialist period, a world bank report from 2007 notes "despite its low per capita income, Mongolia has relatively strong health indicators; a reflection of the important health gains achieved during the socialist period." On average Mongolia's infant mortality rate is less than half of that of similarly economically developed countries, its under-five mortality rate and life expectancy are all better on average than other nations with similar GDP per capita. Since 1990, key health indicators in Mongolia like life expectancy and infant and child mortality have steadily improved, both due to social changes and to improvement in the health sector. Echinococcosis was one of the commonest surgical diagnoses in the 1960s, but now has been greatly reduced.

Energy in Mongolia

Mongolia had a total primary energy supply (TPES) of 6.66 Mtoe in 2019. Electricity consumption was 7.71 TWh. Mongolia is a big producer of coal, which is mostly exported. Domestic consumption of coal accounts for about 70% of Mongolia's primary energy and makes up most of the electricity generation, accounting for about 87% of the domestic electricity production in 2019.

Mongolia - Key Economic Indicators

Exports and Imports

In 2023, Mongolia's exports totaled approximately $7.4 billion, with minerals such as copper, gold, and coal constituting the majority. China remains the largest export destination, accounting for around 85% of total exports, followed by Russia and Canada. Imports amounted to roughly $6.8 billion, with machinery and equipment, fuel, and consumer goods being the primary imports.

Infrastructure

Mongolia has allocated significant resources to infrastructure development, with an investment of over $3 billion in road networks, bridges, and transportation links. This includes the construction of over 1,000 kilometers of new roads and the rehabilitation of existing infrastructure to improve connectivity within the country and with neighboring regions.

Balance of Trade

Despite efforts to diversify exports, Mongolia continues to experience a trade deficit. In 2023, the trade deficit stood at approximately $600 million. However, revenues from mineral exports, which accounted for nearly 90% of total exports, helped offset this imbalance to some extent.

Fiscal Policy

The government's fiscal policy involves prudent management of public finances, with total government spending reaching $11.5 billion in 2023. Revenue generation, primarily from the mining sector, contributed significantly to funding government programs and infrastructure projects. Tax reforms have been implemented to improve revenue collection and promote investment.

Monetary Policy

The Bank of Mongolia has maintained a cautious approach to monetary policy, with the benchmark interest rate held at 8% in 2023. This was aimed at balancing the need to support economic growth while managing inflation, which stood at around 7%. The central bank's interventions in the foreign exchange market helped stabilize the currency, the Mongolian tögrög (MNT), against external volatility.

Trade Agreements

While not part of NAFTA, Mongolia has actively pursued bilateral and multilateral trade agreements to expand its market access. Bilateral agreements with China and Russia have been crucial, with trade volumes between Mongolia and China reaching $9.8 billion in 2023. Additionally, Mongolia is a member of the Asia-Pacific Trade Agreement (APTA) and the Eurasian Economic Union (EAEU), enhancing its trade relations with member countries.

Environmental Regulations

Mongolia has implemented stringent environmental regulations to mitigate the ecological impact of mining activities. Reclamation requirements for mining sites and pollution control measures have been enforced to minimize environmental degradation. The government allocated approximately $100 million to environmental conservation efforts in 2023, focusing on sustainable development initiatives and biodiversity conservation.

Tax System in Mongolia

Capital Gains Tax: Mongolia's capital gains tax rate varies depending on the type of investment and duration of ownership. Short-term capital gains (assets held for less than one year) are typically taxed at a higher rate, which can be up to 30%.
Corporate Tax Rate: The standard corporate tax rate remains at 10% for most businesses. However, special rates may apply to specific industries or regions to encourage investment and economic development.
Sales Tax (VAT): Mongolia's value-added tax (VAT) rate stands at 10% for most goods and services. Certain essential items may be subject to lower rates or exemptions to alleviate the tax burden on consumers.
Property Tax: Property tax rates in Mongolia can vary based on factors such as location, size, and use of the property. Residential properties are taxed at a progressive rate ranging from 0.1% to 1% of the property's assessed value.
Payroll Tax: Payroll taxes fund social security programs, including pensions, healthcare, and unemployment benefits. The total payroll tax rate for employers and employees combined is around 22-26% of the employee's gross salary.
Tax Deductions and Credits: Mongolia offers various deductions and credits to individuals and businesses to reduce their tax liabilities. These incentives may include deductions for expenses such as education, healthcare, and charitable contributions, as well as credits for investments in certain sectors or regions.
Tax Compliance: Mongolia has been implementing measures to enhance tax compliance and efficiency, including electronic filing systems, taxpayer education, and strengthened enforcement mechanisms.
Tax Burden: The overall tax burden on individuals and businesses is influenced by factors such as tax rates, the tax system's structure, and economic conditions. Balancing the tax burden to ensure fairness and promote economic growth remains a priority for Mongolia's fiscal policy.

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