At the Edge of Risk : Assessing Mongolia’s “Plausible Worst-Case” Scenario

Overview & Synopsis

This paper develops a plausible worst-case scenario for Mongolia in which three major disasters—a sudden collapse in coal exports to China, a prolonged dzud (severe winter disaster), and a severe flood in Ulaanbaatar—occur in quick succession. While each event has precedent in Mongolia, an increasingly unstable climate raises the likelihood of their overlap within the next 20 years. Conventional estimates of climate damage fail to capture the country’s exposure to compounding economic shocks, which could undermine development and disproportionately affect vulnerable groups. This analysis finds that the convergence of these three crises could result in a 20 percent negative shock to annual gross domestic product over a three-year period, severely disrupting output and employment. The findings underscore the need for policy decisions based on worst-case scenarios rather than mean projections, emphasizing proactive adaptation measures to mitigate systemic risks. The paper highlights key vulnerabilities and calls for a shift from reactive crisis response to strategic preparedness, multi-sectoral coordination, and resilience planning to safeguard Mongolia’s economic future.