Mongolia’s Economy Under Pressure: The Role of Climate in Shaping Economic Futures

The Asian Development Bank’s study reveals Mongolia’s economy is highly vulnerable to climate variability, with temperature increases reducing GDP and livestock, while precipitation offers limited benefits. Targeted policies, climate-resilient infrastructure, and international funding are essential for mitigating these impacts and ensuring sustainable growth.

The Asian Development Bank’s comprehensive analysis, conducted by researchers Dorothea M. Ramizo, Homer Pagkalinawan, and Maria Carina Tinio, highlights the profound economic impacts of weather shocks in Mongolia, a cold-climate developing economy heavily reliant on agriculture and livestock. Using extensive data from the University of East Anglia Climate Research Unit and advanced modeling techniques, the study finds that a 1°C increase in annual temperature reduces GDP per capita by 4.8% within two years and provincial outputs by 3.5% within four years. Conversely, even modest rainfall increments like an additional millimeter boost provincial GDP by up to 1.3% over two years. This nuanced relationship between temperature, precipitation, and economic output underscores the vulnerabilities of Mongolia’s climate-sensitive economy and the importance of tailored policy responses to enhance resilience.

The Vulnerable Backbone: Livestock in Crisis

Mongolia’s livestock sector, central to its economy and cultural identity, faces severe threats from climate variability. Dzuds harsh winter storms that devastate pastures and herds exemplify the catastrophic effects of extreme weather. The 2023–2024 dzud caused over 7 million livestock deaths, wiping out more than 10% of the national herd. While increased precipitation generally benefits livestock by improving grazing conditions, the effects of rising temperatures are mixed. Warmer conditions temporarily increase livestock numbers at the provincial level, but this gain reverses within two years due to resource depletion, heat stress, and disease. Nationally, the aggregated impacts are more damaging as extreme events disproportionately affect key livestock regions. This disparity between provincial and national outcomes highlights the urgent need for localized adaptive strategies and sustainable pasture management to safeguard this critical sector.

Mining Gains, Construction Stumbles

Sectoral impacts from climate shocks reveal stark contrasts. Mining, a cornerstone of Mongolia’s economy, thrives under warmer conditions, especially in small-scale operations where milder weather eases logistical and operational challenges. Large-scale mining, with its advanced infrastructure, remains relatively insulated from climatic fluctuations. In contrast, agriculture struggles with reduced crop yields, lower pasture availability, and heightened livestock mortality due to temperature and precipitation extremes. The construction sector faces significant setbacks, with excessive rainfall causing delays, damaging materials, and creating unsafe conditions. These disruptions ripple across the economy, hindering infrastructure development and broader economic growth. Manufacturing, however, benefits from increased precipitation, which enhances the supply of raw materials like leather and wool. These findings highlight the complexity of climate impacts across sectors and the need for diversified economic strategies.

Building Resilience Through Targeted Policies

The study emphasizes that addressing Mongolia’s climate vulnerabilities requires both immediate and long-term strategies. Investments in climate-resilient infrastructure, such as heat-adaptive buildings and roads, are crucial to reducing economic losses. In agriculture, adopting climate-smart practices like drought-resistant crops, improved irrigation, and supplemental livestock feeding can mitigate adverse effects. Tailored provincial strategies are equally critical, given Mongolia’s diverse climatic conditions. For instance, wetter provinces could focus on water-intensive agriculture, while arid regions might prioritize renewable energy or mineral processing. The researchers also stress the importance of closing the climate financing gap. By tapping into international climate finance mechanisms, such as concessional loans and multilateral grants, Mongolia can fund essential infrastructure projects and resilience-building initiatives. This approach can help safeguard livelihoods and promote sustainable growth in the face of increasing climate variability.

A Blueprint for Other Vulnerable Economies

Mongolia’s experiences offer valuable lessons for other developing economies heavily reliant on agriculture, livestock, or natural resources. The differentiated impacts observed across sectors and regions highlight the importance of localized policies that reflect specific climatic and economic conditions. Countries in Central Asia or arid regions share similar vulnerabilities and can benefit from Mongolia’s data-driven approach to climate resilience. Investments in adaptive infrastructure, tailored economic strategies, and proactive disaster preparedness can mitigate the risks posed by climate variability while fostering sustainable development. Mongolia’s case demonstrates the potential of combining evidence-based policies with international cooperation to navigate the complex challenges of climate change effectively.

The study illustrates that while Mongolia’s national economy benefits from a relatively diversified industrial base, rural and provincial economies remain highly exposed to weather shocks due to their reliance on agriculture and livestock. By adopting targeted interventions and leveraging international resources, Mongolia can enhance its resilience to climate variability, providing a model for other vulnerable economies to emulate. This blend of localized adaptation, national planning, and global partnerships is essential for ensuring economic stability and sustainability in the face of an unpredictable climate future.