Poverty in Black Sea Countries

February, 2009Europe and Central Asia Region

2

Key Messages (1) Economic growth with stable inequality (so

far!) have dramatically reduced poverty in Black Sea area since 2002 to 2006 - 16m fewer poor and 27m fewer vulnerable.

Note: Black Sea for this presentation includes: Armenia, Azerbaijan, Bulgaria, Georgia, Moldova, Romania, Turkey, Russian Federation, Ukraine

3

Key Messages (2) BUT three major concerns loom:

One-third of the Region’s population was poor (27M) or vulnerable (87m)

Global crisis – financial commodities, food, etc have significant impact on poverty. Close to 6 million people are projected to remain in poverty in 2009-10.

Growing inequality within many countries threatens to slow down the pace of the future poverty reduction and social cohesion .

4

Key Figures

Black Sea Countries

Total ECA Countries

Share Black Sea to Total

A B A/B

Number of Countries 9 28 32%

Total Population (millions) 313 477 66%

Poor Population less than $2.5 a day (millions) 27 48 56%

Vulnerable Population $2.5-$5 a day (millions) 87 135 65%

Non Poor Population $5 plus a day (millions) 198 294 67%

Poverty & Vulnerability Rates (Including Russian Federation)

Poverty Rates (less than $2.5 a day) 8.6 10.0 86%

Vulnerability Rates ($2.5-$5 a day) 27.9 28.3 99%

Poverty & Vulnerability Rates Excluding Russian Federation

Poverty Rates 12.2 10.0 121%

Vulnerability Rates 33.5 28.3 118%

5

Between 2002 and 2006, poverty incidence in Black Sea fell by almost 16M and vulnerability by 27M comparable to the trend observed in ECA region

Source: Bank staff estimates based upon ECA Household Data Archives and 2005 ICPs.

6

MICs and EU countries in Black Sea region show the biggest falls in poverty and vulnerability

Black Sea Regions Population by Poverty Status 2002 - 2006 (Millions and shares)

12.7

10.9

65.8

41.5

25.023.6

10.1

11.6

6.5

11.6

112.2

141.8

30.636.5

2.63.3

7.015.9

3.3

7.6

12.613.05.2

8.0

0%

20%

40%

60%

80%

100%

EU 2002 EU 2006 MIC-CIS 2002 MIC-CIS 2006 Turkey 2003 Turkey 2005 LIC-CIS 2002 LIC-CIS 2006

Poor: Below $ 2.50 a Day Vulnerable: Above $ 2.50 and Below $ 5.00 a Day Non-Poor: Above $ 5.00 a Day

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Ukraine, Romania, Azerbaijan and Russia have the highest reduction in Poverty and Vulnerability, Georgia and Turkey have the lowest

Percentage points of poverty reduction 2002-2006

-1.7

-3.6

-4.8

-5.1

-7.3

-14.4

-22.3

-25.8

-30.00 -25.00 -20.00 -15.00 -10.00 -5.00 0.00

Turkey

Russian Federation

Georgia

Azerbaijan

Ukraine

Romania

Moldova

Armenia

% change in $2.50 Poverty

8

Russia and Turkey with two-thirds of the population also have two-thirds of the poor and the vulnerable

Poor and Vulnerable Population Population Distribution, 2005

Russian Federation

31%

Turkey32%

Ukraine11%

Romania10%

Azerbaijan6%

Georgia3%

Moldova3%

Armenia2%

Bulgaria2%

Poor and Vulnerable Population Population Distribution, 2002

Russian Federation

36%

Turkey24%

Ukraine17%

Romania10%

Azerbaijan4%

Georgia3%

Moldova2%

Bulgaria2%

Armenia2%

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But LIC-CIS have highest rates of poverty and

vulnerability

0%

20%

40%

60%

80%

100%

Armenia Azerbaijan Georgia Moldova Romania Turkey Ukraine RussianFederation

Bulgaria

Poor: Below $ 2.50 a Day Vulnerable: Above $ 2.50 and Below $ 5.00 a Day Non-Poor: Above $ 5.00 a Day

Poverty and Vulnerability Rates in Black Sea Countries 2006

10

Poverty is increasingly rural in most countries , while gaps between rural and urban poverty differ significantly across countries

Source: Ravallion (2007)

Rural poverty is higher in most countries

2.7

33.6

1.34.3 2.61.5

7.6

35.3

46.6

1.8

6.5

47.2

8.8

21.7

35.6

29.5

10.47.8

0

5

10

15

20

25

30

35

40

45

50 Urban

Rural

11

Within-country differences between regions are increasing in most countries

12

Labor market gains are important for the poor

– primarily from the growth in real wages

Net monthly wages per capita

Romania

0

50

100

150

200

250

1 2 3 4 5 6 7 8 9 10

Consumption Deciles

$ W

ages

per

Mo

nth

2002 2005-6

Moldova

0

50

100

150

200

250

1 2 3 4 5 6 7 8 9 10

Consumption Deciles$

Wag

es p

er M

on

th

2002 2005-6

13

...as net job creation was scarceEmployment rates by consumption deciles, %

Georgia

0.4

0.45

0.5

0.55

0.6

0.65

0.7

0.75

0.8

0.85

1 2 3 4 5 6 7 8 9 10

Decile

ER 2002 ER 2005/06

Romania

0.4

0.45

0.5

0.55

0.6

0.65

0.7

0.75

0.8

0.85

1 2 3 4 5 6 7 8 9 10

Dec ile

ER 2002 ER 2005/06

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Public transfers are higher in real terms and likely to have increased incomes of the poor

• pension benefits up

• number of pensioners is higher

• social assistance higher

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Other aspects of well-being have also improved

Access to education, health and essential infrastructure such as water, electricity and phones have improved substantially.

However there are two main concerns: Quality of services have not improved with expectations Lingering concerns over corruption and unequal

treatment

Example: Access to Justice

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Access to essential services

Access to selected services

0

20

40

60

80

100

120A

rmenia

Bulg

aria

Russia

Bulg

aria

Arm

enia

Mold

ova

Arm

enia

Rom

ania

Georg

ia

Arm

enia

Georg

ia

Ukra

ine

Arm

enia

Rom

ania

Mold

ova

Turk

ey

Arm

enia

Azerb

aijan

Georg

ia

SecondaryenrollmentAge 15-17

Morbidity rate Health CareUtilization

Access towater

Use of cleanheating

Housingovercrowding

Rate

s

Average( (all country) Bottom Quintile

17

Reduction in prevalence of informal payments resulted in substantial increase in utilization rates (2001-2006)

Source: Sundaram, R. and S. Zaidi (forthcoming) Satisfaction with Publicly Provided Health Services in Eastern Europe and the former Soviet Union

-40 -30 -20 -10 0 10 20 30 40 50 60

Belarus

Russ ia

Kyrgyzs tan

Ukraine

Moldova

Armenia

Kazakhstan

Georgia

Increase: Access rates Decline: prev alence of unofficial pay ments

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Trust in institutions of justice

Trust in Courts

0% 20% 40% 60% 80% 100%

ArmeniaAzerbaijBulgariaGeorgiaMoldovaRomaniRussiaTurkey

Ukraine

complete distrust some distrust

neither trust nor distrust some trust

complete trust

19

Trust in institutions of justice

Trust in the Police

0% 20% 40% 60% 80% 100%

ArmeniaAzerbaijBulgariaGeorgiaMoldovaRomaniRussiaTurkey

Ukraine

complete distrust some distrust

neither trust nor distrust some trust

complete trust

20

Satisfaction with institutions of justice

Satisfaction with Court for a civil matter

0% 20% 40% 60% 80% 100%

Armenia

Azerbaijan

Bulgaria

Georgia

Moldova

Romania

Russia

Turkey

Ukraine

Very unsatisfied Unsatisfied Indifferent Satisfied Very satisfied

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A) However, there are significant risks to poverty reduction: current economic crisis – short to medium term

risk: Macro impacts

Growth slowdown –possibility of contractions in some countries Reduction in Exports, FDI flows and remittances Tighter liquidity concerns for governments (foreign service), firms (credit and

trade finance)

Micro (or Households impacts) Income/wages slowdown and/or losses of jobs Sectoral displacements – contraction in sectors where poor are largely

employed (e.g. construction, trade, commodities); Loss of remittances Difficulties in mortgage repayment compounded by currency depreciation Loss of pension assets invested in stock markets

All lead to substantial impact on productivity, poverty and vulnerability

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Poverty will remain stagnant in the region in 2009 and in 2010. Close to 6 million people in Black Sea region will not be

able to get out of poverty in 2009-10 following the crisis.

Poverty Projections Black Sea

3

3.5

4

4.5

5

5.5

6

6.5

7

2007 2008 2009 2010

BL

NOV

JAN

6M people

Poverty Projections ECA

3

4

5

6

7

8

9

2007 2008 2009 2010

BL

NOV

JAN

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B) Multiple impacts of climate change and entry points for policy response

Average temperature

Average precipitation

CO2 fertilizationeffect

Climate variability and extreme events

Change in surface water

availability

Crop yields, livestock productivity and

production variability

Food availability and prices

Economic impact and

food security

Technology and investment

in adaptation

Trade

Income and population growth, income distribution

P

P

P

P

P Autonomous adaptation

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Climate change profile for ECA

PRE - FINAL 070607 8

Top 25 « footprints »(WRI/Pew Center; data for 2000 )

Top 25 « footprints »(WRI/Pew Center; data for 2000 )

Saudi Arabia

Top 25 in Emissions(excl. LUCF)

Top 25 in GDP

USA, China, EU25, Russia, India, Japan, Germany, Brazil, UK, Italy, Mexico, France ,Indonesia, Iran, Turkey

Ukraine, Pakistan

Canada ,Rep. Korea,

Australia ,S. Africa ,Spain,

Poland,Argentina

Netherlands, (Taiwan)

Thailand

Bangladesh, Nigeria, Viet Nam, Philippines, Ethiopia,

Egypt, Congo

Top 25 in Population

In a global context, the EU-25, Russia, Turkey, Ukraine and Poland

rank among the top 25 countries for global carbon emissions,

population (except Poland) and GDP (except Ukraine).

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Climate change – systemic and longer term

Temperatures – expected to be hotter, with more extremes Means

Mean temperatures will increase everywhere (most rapidly in the north),

Precipitations will decrease in the south, and increase in the north

Extremes Weather extremes will be more frequent (droughts,

floods, wind storm, heat waves)

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Temperature changes in Europe around 2100 (A1B scenario)

Source: D. Jacob, Max Planck Institute; http://www.climate-water-adaptation-berlin2007.org/documents/jacob.pdfA1B scenario is the third worst socio-economic scenario of the six developed by the IPCC

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Likely geophysical impacts More difficult water resource management:

Glacier melting Flooding (especially Central Europe; central Russia?) Droughts (southern Europe) All of which will affect ability to provide sanitation and (drinking) water

Melting permafrost (Russia)

Vulnerable low lying coastal areas (from rising sea levels and coastal storm surges - Baltics, Romania, Turkey…)

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Precipitation changes in Europe around 2100 (A1B scenario)

Source: D. Jacob, Max Planck Institute; http://www.climate-water-adaptation-berlin2007.org/documents/jacob.pdfA1B scenario is the third worst socio-economic scenario of the six developed by the IPCC

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What needs to be done Enhance social protection

Continue strengthen social safety by increasing the efficiency and staying within available public resources

Targeted interventions by marginalized groups and minorities Ensure adequate minimum wages sensitive to labor market

conditions

Monitor progress Maintain affords to collect more comprehensive data Improve quality, coverage and address non-response Monitor trends in quality of public services Provide open access

____________

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What needs to be done (2)

On climate change: Adaptation can significantly reduce economic losses and poverty impacts

Mitigation efforts reduce emissions or enhance the capture of emissions, thereby reducing escalation of impacts

Even the most ambitious global mitigation will not be sufficient, however, and adaptation programs are needed so that populations and critical ecosystems cope with residual impacts

Reforestation and investments in clean energy can provide mitigation and adaptation benefits