Meteoric Mongolia

Why It's Ascending So Fast -- And How It Might Fall

This article is the first installment of a five-part series examining the world's fastest-growing economies, according to the IMF World Economic Outlook.Mongolia's Oyu Tolgoi mine. (Courtesy Reuters)

While Western economies have struggled to achieve two percent annual GDP growth of late, Mongolia has tallied rates well into two digits. After the Mongolian economy contracted 1.3 percent in 2009 -- the height of the recession -- it grew by 6.4 percent in 2010, and then by an astonishing 17.3 percent in 2011. And the stellar performance has only continued: The International Monetary Fund (IMF) estimates that Mongolia's GDP increased by 12.7 percent in 2012. The IMF projects a growth rate of 15.7 percent in 2013. All this makes it the world's fifth-fastest growing economy. But these jaw-dropping figures conceal deeper economic dislocations.

At first glance, Mongolia's recent performance contrasts sharply with the country's economic malaise in the early 1990s. After the collapse of the Soviet Union, the withdrawal of aid from Moscow and the decrease in trade with the Soviet bloc led to a precipitous economic decline, prompting Ulaanbaatar to seek assistance from international financial agencies. The "shock therapy" prescribed by the IMF and the Asian Development Bank, which consisted of privatizing companies, minimizing government, eliminating subsidies, liberalizing trade, and enacting austerity measures, exacerbated Mongolia's difficulties. Unemployment, poverty, corruption, and the attendant social problems afflicted Mongolia throughout the 1990s and into the next decade.

But the Mongolian economy has not progressed as radically as that simple story suggests. In fact, much of the recent growth has derived from just one

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