Mongolia's Midas touch loses some of its shine
Populist policies and a weak global economy have taken the edge off foreign interest in investing in the landlocked country
Mongolia's red-hot economy - one of the world's fastest-growing - has the chills due to a decline in investment interest from foreign investors.
The decline was brought on by a weak global economy and unfriendly policies launched by Mongolia's new populist government.
A World Bank economic report released late last month on the resource-rich nation sandwiched between Russia and China says Mongolia's economic growth fell from 18 per cent last year to 16.5 per cent in this year's first quarter and to 11 per cent in the second quarter.
Much of the growth was supported by construction of the Oyu Tolgoi copper and gold mine, one of the world's biggest. The mine is due to start commercial production next year and is expected to boost Mongolia's output by up to a quarter.
For the moment, the third quarter's outlook remains grim, as exports - over 90 per cent of which go to China, mostly in the form of coal and metals - fell 39 per cent year on year. That was the biggest fall since the height of the global financial crisis in mid-2009, but the World Bank expects full-year growth to be above 10 per cent.
The immediate change of fortunes came as growth in mainland steel production, the main driver for Mongolian coking coal, and iron ore exports, tumbled to low single-digits in the past few months, the lowest in three years. China's export-oriented manufacturing sector was hit by weak demand from developed nations struggling with sovereign debt woes, while domestic demand also slowed as Beijing's tight grip on lending to the overheated property sector remained firm.