Social Convergence, Inclusion and Poverty Reduction in Armenia Vahram Avanesyan, Director, AVAG

Solutions, Armenia.

Black Sea Conference on Regional Integration and Inclusive Growth

February 23-24, 2009

Main facts about poverty reduction in Armenia In 1999 first comprehensive attempt to estimate

poverty incidence reveled: Over 56% of population is poor, and Over 27% leave in extreme poverty

Between 1999 and 2007 poverty incidence in Armenia declined by more than two times

In the same period extreme poverty declined by almost 7 times

Main contributors to poverty reduction between 1999 -2007 Strong economic growth

Per capita GDP growth – 2.4 times Growth elasticity of poverty – 0.45

Decline in income inequality Gini down by about two times

Expansion and more targeted social protection Per capita social protection expenditures

increased by 4.2 times Private Transfers from abroad up by 100%

Real GDP, Employment and real wage indices, Armenia 1990-2008 and 2002-2008

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

Real GDP Index (1990=100)

Employment to population index (1990=100)

Real wage index, 1990 = 100

0.00

50.00

100.00

150.00

200.00

250.00

300.00

2002 2003 2004 2005 2006 2007 2008

Real GDP Index (2002=100)

Employment (off icial statistics) Index (2002=100)

Real w age index, (2002=100)

Income structure

0%

10%

20%

30%

40%

50%

60%

70%

1999 2001 2002 2003 2004 2005 2006 2007

Labour income Agrosales Social transfers Private transfers

Income and Consumption Inequality trends

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.6

0.65

1996 1999 2004 2005 2006 2007

Gini coefficient of income concentration

Gini coefficient of consumption

Impact of social protection expenditures on poverty

34.6 29.8 26.5 25

69.1

44.8

39.832.8 33.256.1

15

25

35

45

55

65

75

1999 2004 2005 2006 2007

Poverty rate before social protection, % Actual Poverty rate,%

Private transfers reduce poverty risk but rich benefited more

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10

Decile

% o

f In

com

e

0

2

4

6

8

10

12

14

% o

f In

com

e

Social protection (Left) Private transfers (right)

Social convergance in Republic of Armenia ( Region/Marze level)

Kotayk 61.7 Aragatsotn 60.5

Armavir 41.7

Ararat 52.3

Shirak 75.8

Lori 62.6

Vayots Dzor 34.7

Syunik 53.1

Yerevan 58.4

Gegharkunik 49.9

Tavush 29.3

Kotayk 30 Aragatsotn 22.2

Armavir 30.7

Ararat 25.5

Shirak 32.1

Lori 26.8

Vayots Dzor 13.7

Syunik 24

Yerevan 20

Gegharkunik 29.6

Tavush 21.6

Poverty by Region 1999

Poverty by Region 2007

STDEV-13.2Min/Max gap- 46.5 percentage points

STDEV-5.5Min/Max gap-18.4percentage points

Projected Impact of SDP social protection policieson poverty

44.8

33.2

27.925.5

22.6

18.4

6.8

10.1

14.0

17.5

25.0

34.6

0

5

10

15

20

25

30

35

40

45

50

2004 2007 2010 2012 2015 2021

Poverty rate before social protection expenditures,% Poverty rate,%

Actual SDP Projections

Poverty challenges posed by the crisis Scenario 1

Protectionism Slow down of economic

reforms Expansion of social

protection beyond fiscal sustainability

Scenario 2 Accelerate and enhance

economic reforms Provide more targeted

social protection maintaining fiscal sustainability

Poverty challenges posed by the crisis

0

5

10

15

20

25

30

35

40

45

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Pre transfer poverty rate ( adjusted to crisis) Poverty rate SDP

0

5

10

15

20

25

30

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Poverty rate (adjusted to crisis) Poverty rate SDP

First Scenario

Second Scenario

0

5

10

15

20

25

30

35

40

Pre transfer poverty rate ( adjusted to crisis) Poverty rate SDP

0

5

10

15

20

25

30

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Poverty rate (adjusted to crisis) Poverty rate SDP

Thank you