Mongolia’s extensive mineral deposits of— copper, coal, gold and other resources have driven rapid economic growth over the past decade. Mining now contributes over 20% of GDP and 89% of exports which is transforming Mongolia into one of the world’s fastest growing economies with GDP expanding by over 6% a year on average.
Several mega mines have entered production since 2010 like- the Oyu Tolgoi copper-gold mine and Tavan Tolgoi coal mine based on over $20 billion in foreign investment. Coal exports to China have been the mainstay though slowed recently. Huge copper concentrate exports are projected as OT expands.
Further major mining projects are in the pipeline and will drive growth for years to come. The IMF estimates total investment of $1.5 trillion in the mineral sector in the coming decades. Realizing this potential while mitigating adverse impacts will be a key challenge.
The booming mining industry has created extensive spillover effects and linkages across Mongolia’s economy. Mining revenues have enabled rising public and private consumption and construction activity. Transportation, logistics and other services also benefit.
However— an overdependence on minerals makes the economy vulnerable to commodity downturns and boom-bust cycles. The previous commodity crash from 2012-2016 halved FDI inflows and slowed growth considerably until prices recovered. Strengthening economic diversification remains a priority.
The mining industry has a substantial impact on Mongolia’s economy, contributing significantly to its GDP, exports and budget revenue. According to the World Bank— the mining sector accounted for approximately 22 percent of Mongolia’s GDP in 2021 and over 80 percent of the country’s exports. It is a major driver of economic growth with – copper, gold, uranium, silver and coal mines contributing to 20-30% of the national GDP and 89% of annual exports.
The industry is a key source of foreign direct investment and is accounting for 75% of foreign direct investment and 26% of the country’s budget revenue in 2020. However—this heavy reliance on the mining sector has also made the country vulnerable to fluctuations in the global mining industry, as seen during the recent downturn.
Local Government is actively working towards diversifying the economy and attracting foreign investment to reduce this vulnerability and create a more balanced economic structure. Despite the economic benefits, the rapid expansion of the mining industry has raised concerns about its environmental and social impacts, with a fifth of Mongolian land earmarked for mining and potential threats to the country’s fragile environmental balance.