Mongolia is a country of contrasts. It has rich natural resources, but a fragile economy and uneven development. The country is huge – about 1.5 million square kilometers – but only around 3.5 million people live there. Almost half of them are concentrated in the capital, Ulaanbaatar.
Mongolia ranks 126th in the world by GDP size. The economy is growing, but not steadily. In 2024, GDP increased by 5.9%, mostly thanks to a sharp rise in exports of coal, copper, and gold.
At the same time, the structure of the economy remains weak. Services make up 43% of GDP, industry 34%, and agriculture 13%. More than 80% of output comes from the private sector, where small and medium-sized businesses provide over 70% of jobs. But mining is still the main driver. This makes the country highly dependent on global demand and commodity prices.
Exports are heavily tied to China – about 84% go there. China also supplies around one-third of Mongolia’s imports. This level of dependence makes the economy vulnerable to Beijing’s political and logistical decisions. On top of that, infrastructure is underdeveloped – railways are limited, energy systems are inefficient, and transport costs are high. All of this slows down diversification and growth.
Climate risks add more pressure. The winter of 2024 led to the loss of nearly 7 million livestock, pushing meat prices higher and hurting nomadic households.
Another long-standing issue is corruption and weak institutions. The so-called “coal scandal” of 2022 became a clear symbol of this problem. Around $13 billion was stolen during coal exports to China – almost a quarter of the country’s GDP. The scandal damaged public trust and triggered protests.
The social situation is also tough. Inflation was close to 10% in early 2025. Prices for imported goods jumped by more than one-third. Over 25% of the population lives below the poverty line. The ger districts of Ulaanbaatar, with no proper sewage or stable heating, show the gap between the center and the rest of the country.
Still, Mongolia has strong potential. Expansion at the Oyu Tolgoi mine, the launch of the Zuuvch Ovoo uranium project, and the development of renewable energy could change the picture. The country’s renewable energy potential is estimated at 2,600 GW.
The idea of “Greater Central Asia”
Mongolia is in a сложной position, balancing between China and Russia. In this situation, the traditional “third neighbor” policy is no longer enough. The country needs to broaden its strategy, and Central Asia is a natural direction for that.
Cooperation with Kazakhstan and other regional countries is still limited. But this is where real opportunity lies. Kazakhstan has strong transport infrastructure and access to the Caspian Sea, which can give Mongolia an alternative route to Europe. In return, Mongolia can offer its resource base.
The idea of “Greater Central Asia” – including Mongolia and Afghanistan – could create a new macro-region. It could be built around shared goals: developing infrastructure and industry, dealing with climate challenges together, reducing dependence on major powers, and expanding markets.
For Mongolia, this is a chance to break out of geographic isolation. It can also reduce reliance on Beijing and Moscow. In many ways, this would be a logical next step for its “third neighbor” policy.
Possible areas of cooperation within “Greater Central Asia”:
- Building Eurasian transport corridors, where Mongolia and Kazakhstan act as key links between East Asia, the Caspian region, and Europe;
- Resource cooperation and industrial processing. Mongolia mainly exports raw materials today, while Central Asian countries are moving into industrial production. Joint industrial zones and processing clusters could help Mongolia move up the value chain, for example in producing cathode copper;
- Joint climate adaptation programs for agriculture. Mongolia and Central Asia face similar issues – droughts, pasture degradation, and harsh winters. Cooperation could include pasture monitoring, satellite climate analysis, and better water management;
- Reviving the Central Asian energy ring. In the future, Mongolia could be included in a shared system focused on nuclear energy and renewables.
Yerlan Karimov, independent expert, specifically for www.economyKZ.org
