A bright future for Mongolia?
Economists predict that the Asian economy of Mongolia will be the fastest growing economy
between 2015 and 2020. In 2011, the country’s economic growth rate was 21%. The forecast
annual growth rate for 2015 to 2020 is 24%.
The country is rich in a range of minerals including coal, copper, gold, silver and uranium. China
purchases large quantities of these minerals. In 2011, there was a significant rise in the world
demand for a range of minerals including copper. Some economists have pointed out that there
are a number of risks attached to an economic boom caused by a rise in demand for minerals.
One is the so-called ‘resources curse’. This refers to the disadvantage that can arise as natural
resources are used. High international demand for minerals can push up the exchange rate and
reduce the competitiveness of other industries. The extraction of minerals can also cause pollution.
This is certainly the case in Mongolia. The capital city, Ulaanbaatar, is one of the most polluted
cities in the world.
The Mongolian economy faces a number of other problems. Its inflation rate is relatively high,
reaching 10.6% in 2011, driven up by increases in food prices and rises in government spending.
Its unemployment rate, at 10% in the same year, was above that of some of its Asian neighbours.
This led it to being placed relatively high in the region’s ‘misery index’. This index, developed by
the American economist Arthur Okun, adds together the unemployment rate and the inflation rate.
Table 1 shows the unemployment rate, misery index and the interest rate for a number of Asian
economies.
Table 1: The unemployment rate, misery index and interest rate for selected Asian
economies in 2011
Country
|
Unemployment rate (%)
|
Misery index (%) (unemployment rate
+ inflation rate)
|
Interest rate (%)
|
China
|
6.1
|
11.7
|
3.4
|
India
|
10.8
|
19.8
|
8.4
|
Japan
|
4.5
|
4.2
|
1.0
|
Malaysia
|
3.1
|
6.4
|
3.0
|
Mongolia
|
10.0
|
20.6
|
12.3
|
Nearly 40% of Mongolia’s population lives below the poverty line. However, with rising economic
growth, income levels are increasing. Indeed, some economists are predicting that Mongolians
will become very rich. Tax revenue will also rise, which will enable the government to increase
its spending on, for instance, education. Higher spending on education will make it possible for
children to spend more years in school.
Define ‘economic growth