Mongolia’s careful balancing act adds to growth potential
Being stuck between Russia and China has never put more pressure on Mongolia than in the past year. But the authorities and banks are making the best of a near-impossible situation – and succeeding in the process.
Few high-growth economies feel more under siege than Mongolia heading into 2023.
To the north, Russia is under pressure because of the sanctions imposed over its invasion of Ukraine. To the south, China’s disastrous zero-Covid policies have pushed its growth to the slowest in 30 years – although there has been some respite since early December. And to the west, the US Federal Reserve’s tightening is hitting frontier economies especially hard.
The timing could scarcely be worse for president Ukhnaa Khürelsükh’s financial reform ambitions.
Khürelsükh was elected president in a landslide victory in June 2021, after serving close to four years as prime minister. He promised to speed up efforts to diversify the economy away from high-polluting fossil fuels.
Diversification away from Russia and China has always been, and still is, a daunting task [for Mongolia]
The plan was to digitalize landlocked Mongolia and catalyze a startup boom. Khürelsükh pledged to turn Mongolia into a digital nation in the space of five years.
But in 2022, China expanded its Covid lockdowns around the time that Russian president Vladimir Putin’s army invaded Ukraine, launching the biggest threat to European security in decades.