Mongolia’s gross domestic product (GDP) per capita is on target to hit $5,000 by the end of 2012 from $2,470 currently, the country’s Vice Finance Minister, Ganhuyag Chuluun Hutagt told CNBC.
The country's economy grew 14.3 percent in real terms and 29.1 percent in nominal terms (including inflation) in the first half of this year. Mongolia is one of the world’s fastest growing economies and is currently classed as a low-middle income country by the World Bank.
If it were to hit the $5,000 mark next year, Mongolia would overtake Indonesia in terms of per capita GDP and become as rich as China and Thailand.
The country’s growth is being driven by a booming mining sector and its large reserves of coking coal. Speaking on the sidelines of the World Economic Forum meeting in Dalian, China, Hutagt said Mongolia had become the largest coal exporter to China in August, surpassing Australia.
But that rapid growth is coming at a price. Inflation in the country surged by 10.1 percent in July over the previous year, forcing the central bank to raise its policy rate to 11.75 percent on August 29th.
However, Hutagt suggested there would be no slowdown in government spending in the near-term which could help ease inflation. He said government spending was up 50 percent over 2010 but the country was still on track for a budget surplus.
“We had forecast losses this year, but revenues have been much higher than we had projected, we are on target for a surplus,” he said.
The country’s ruling party faces an election, due to be held around June 2012 and it has been spending the country’s newfound wealth on education and social programs.
Hutagt said the government planned to issue its first sovereign debt early next year, despite running a budget surplus, in order to invest in infrastructure projects such as airports and roads.
The big risk for Mongolia, however, remains its dependence on mining exports, especially to China. A crash landing for China’s economy forecasted by hedge fund investors such as Jim Chanos and economist Nouriel Roubini, could set back the country’s ambitious GDP growth targets.
But Hutagt said the country was seeking to diversify its risks by exporting not just coal but also copper, oil and uranium and targeting other export markets such as Russia.