2021 Index of Economic Freedom

Mongolia

OVERALL SCORE62.4
WORLD RANK86
Rule of Law

Property Rights48.1

Judicial Effectiveness25.9

Government Integrity37.4

Government Size

Tax Burden89.9

Government Spending71.5

Fiscal Health91.3

Regulatory Efficiency

Business Freedom61.9

Labor Freedom74.4

Monetary Freedom73.4

Open Markets

Trade Freedom74.6

Investment Freedom50.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 3.2 million
  • GDP (PPP):
    • $46.7 billion
    • 5.1% growth
    • 4.2% 5-year compound annual growth
    • $12,820 per capita
  • Unemployment:
    • 6.0%
  • Inflation (CPI):
    • 7.3%
  • FDI Inflow:
    • $2.4 billion

Mongolia’s economic freedom score is 62.4, making its economy the 86th freest in the 2021 Index. Its overall score has increased by 6.5 points, primarily because of an improvement in fiscal health. Mongolia is ranked 14th among 40 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.

Mongolia’s economy made it back into the moderately free category this year for the first time since 2013. Greater economic freedom continues to be impeded by a woefully inadequate rule of law. Government corruption is pervasive, and courts are unreliable. Although the government has adopted a national anticorruption strategy and action plan, it has not always implemented existing statutes effectively or evenhandedly.

IMPACT OF COVID-19: As of December 1, 2020, no deaths had been attributed to the pandemic in Mongolia, but the economy was forecast to contract by 2.0 percent for the year.

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Background

After adopting a new constitution in 1992, Mongolia was transformed from a closed single-party Communist state into a dynamic multiparty democracy. This transition has been accompanied by the gradual introduction of free-market reforms and relatively well-maintained political stability. Nevertheless, the Soviet-era Mongolian People’s Party has held a parliamentary majority since 2016. The Democratic Party’s Khaltmaagiin Battulga was elected president in 2017. The next presidential elections are scheduled for 2021. Agriculture and mining remain the most important sectors of the economy. Internationally, Mongolia enjoys observer status in the Shanghai Cooperation Organization and is being considered for membership in the Asia–Pacific Economic Cooperation forum. The majority of ethnic Mongolians today live in China.

Rule of LawView Methodology

Property Rights 48.1 Create a Graph using this measurement

Judicial Effectiveness 25.9 Create a Graph using this measurement

Government Integrity 37.4 Create a Graph using this measurement

Property and contractual rights are recognized, but enforcement is uneven. Although the judiciary is independent, the courts are vulnerable to political interference and corruption, which is endemic. Factors contributing to corruption include conflicts of interest, lack of transparency, limited access to information, an underfunded civil service system, low salaries, and limited government control of key institutions.

Government SizeView Methodology

The individual income tax rate is a flat 10 percent, and the top corporate tax rate is 25 percent. Other taxes include value-added and excise taxes. The overall tax burden equals 16.8 percent of total domestic income. Government spending has amounted to 30.8 percent of total output (GDP) over the past three years, and budget surpluses have averaged 0.2 percent of GDP. Public debt is equivalent to 65.9 percent of GDP.

Regulatory EfficiencyView Methodology

The time it takes to start a business in Mongolia has increased. On the labor front, the government has begun to enforce a rule requiring that companies hire five Mongolians for every non-Mongolian. The government funds subsidies for agriculture, electricity, and other sectors.

Open MarketsView Methodology

Mongolia has one preferential trade agreement in force. The trade-weighted average tariff rate is 5.2 percent, and three formal nontariff measures are in effect. However, other barriers to trade, exacerbated by institutional shortcomings, undermine trade flows. In an effort to attract more dynamic investment, Mongolia has pursued measures to liberalize markets and develop a competitive financial sector, but overall progress has been uneven.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.70.3
2New Zealand83.9-0.2
3Australia82.4-0.2
4Taiwan78.61.5
5Malaysia74.4-0.3
6Japan74.10.8
7South Korea740.0
8Kazakhstan71.11.5
9Thailand69.70.3
10Indonesia66.9-0.3
11Brunei Darussalam66.60.0
12Philippines64.1-0.4
13Kyrgyz Republic63.70.8
14Mongolia62.46.5
15Fiji62.2-1.2
16Samoa61.9-0.2
17Vietnam61.72.9
18Vanuatu60.5-0.2
19Papua New Guinea58.90.5
20China58.4-1.1
21Uzbekistan58.31.1
22Bhutan58.3-3.8
23Tonga57.5-1.3
24Cambodia57.30.0
25Bangladesh 56.50.1
26India56.50.0
27Solomon Islands56.53.6
28Sri Lanka55.7-1.7
29Tajikistan55.23.0
30Burma55.21.2
31Maldives55.2-1.3
32Laos53.9-1.6
33Afghanistan53-1.7
34Pakistan51.7-3.1
35Nepal50.7-3.5
36Micronesia50.4-1.6
37Turkmenistan47.40.9
38Timor-Leste44.7-1.2
39Kiribati44.4-0.8
40North Korea5.21.0
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