B.otgontugs: the Mongolian Economy Fell After Two Major Hits

Trans. by B.DULGUUN

The following is an interview with the Deputy Director of Economics School of the National University of Mongolia and Doctor of Philosophy in Economics, B.Otgontugs, about the present economic situation in Mongolia.

B.Otgontugs believes that too much political involvement is slowing down Mongolia's economy. She also pointed out that the main reason for the slow growth of Mongolia's GDP is connected to lack of progress at Oyu Tolgoi and Tavan Tolgoi projects and the sudden world price drop of main export products of Mongolia.

How do you view the current economic situation?

The actual economic level is determined with GDP. The National Statistical Committee releases seasonal reports on GDP. The economic growth reached only three percent according to the latest report. Everyone is aware that the GDP rose to 17.3 percent in 2011 and reached eight percent last year.

Three percent growth rate is indeed a warning. An economy that was growing so rapidly has fallen to this extent. Now, maintaining the current three percent GDP growth rate and raising it to five or six percent is the most important goal.g

Cash in the market has shrunk consistently with the decline in revenue from raw material exports. Under these conditions, how can Mongolia prevent further drop in GDP growth?

Publications are using the expression "fall down in ravine" to describe Mongolia's economy, probably because they want people to take preventive measures. Giving warning is part of an economist's role. Mongolia can prevent further GDP growth decline. Firstly, ambitious economic goals are essential. Secondly, mutual understanding between all sectors is necessary. Thirdly, the government needs to keep its involvement in businesses low. Large markets should also run according to the law of supply and demand.

Major mining projects have to be started. Starting them would allow Mongolia to draw in investments amounting to up to 300 million USD by the end of 2015. This year, Mongolia has received foreign direct investment of some 500 million USD. It used to be around four to five billion USD before.

Investments will quickly pour into Mongolia if projects advance forward. This will also intensify transportation, logistics and service sectors, as well as boost the labor market, and increase tax revenue. It's possible to increase tax revenue by 300 million USD using economic multiplier effects.

The economic growth will exceed three percent in the second half of 2015...