Region: Eastern Asia

Economic activity in Mongolia has traditionally been based on herding and agriculture. Mongolia has extensive mineral deposits. Copper, coal, gold, molybdenum, fluorspar, uranium, tin, and tungsten account for a large part of industrial production and foreign direct investment. Soviet assistance, at its height one-third of GDP, disappeared almost overnight in 1990 and 1991 at the time of the dismantlement of the USSR. The following decade saw Mongolia endure both deep recession because of political inaction and natural disasters, as well as economic growth because of reform-embracing, free-market economics and extensive privatization of the formerly state-run economy. Severe winters and summer droughts in 2000-02 resulted in massive livestock die-off and zero or negative GDP growth. This was compounded by falling prices for Mongolia's primary sector exports and widespread opposition to privatization. Growth was 10.6% in 2004, 5.5% in 2005, 7.5% in 2006, and 9.9% in 2007 largely because of high copper prices and new gold production. Mongolia is experiencing its highest inflation rate in over a decade as consumer prices in 2007 rose 15%, largely because of increased fuel and food costs. Mongolia's economy continues to be heavily influenced by its neighbors. For example, Mongolia purchases 95% of its petroleum products and a substantial amount of electric power from Russia, leaving it vulnerable to price increases. Trade with China represents more than half of Mongolia's total external trade - China receives about 70% of Mongolia's exports. Remittances from Mongolians working abroad both legally and illegally are sizable, and money laundering is a growing concern. Mongolia settled its $11 billion debt with Russia at the end of 2003 on favorable terms. Mongolia, which joined the World Trade Organization in 1997, seeks to expand its participation and integration into Asian regional economic and trade regimes. Human Development Index 2008 ranking: 114 out of 177