Poverty Trends in Europe and Central Asia

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ISTANBUL — Despite significant progress occurring in Europe and Central Asia since the collapse of the Soviet Union, data collected by the World Bank shows concerning poverty rates in the region. As a result, country representatives and experts involved in creating the Post-2015 Sustainable Development Agenda have expressed the need for a stronger focus on the region moving forward.

In a recent report entitled, “Poverty, Inequality and Vulnerability in the Transition and Developing Economies of Europe and Central Asia,” the U.N. Development Program details poverty trends in the region since 1990 using data collected by the World Bank’s POVCALNET global poverty database. The 15 countries included in the report are Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Georgia, Kazakhstan, Kyrgyzstan, the Former Yugoslav Republic of Macedonia, Moldova, Montenegro, Serbia, Tajikistan, Turkey and Ukraine. Occasionally, Uzbekistan is included; however, concrete data is difficult to obtain as the country does not publicize its poverty or household income statistics.

When measuring poverty rates in these countries the World Bank uses a higher poverty threshold than the $1.25 per day level developed to measure poverty in countries primarily located in the Southern hemisphere. Instead, the World Bank uses a $2.15 per day household income threshold to reflect the higher cost of living in these countries. This amount reflects an individual’s need for more clothing and reliable year-round heating in order to deal with the region’s cold winters.

The World Bank also established a $4.30 per day vulnerability threshold to measure the proportion of the population most susceptible to falling back into poverty. These findings constituted the analysis provided in the second half of the report.

According to the UNDP, prior to the dissolution of the Soviet Union poverty was measured using the Soviet “living wage” of 75 rubles. The model made it somewhat difficult to discern actual poverty levels and compare them to international standards of which there still exists significant debate. In the decade immediately preceding the Soviet Union’s collapse, the World Bank estimates that income poverty was a serious problem in the region and approximately 30 million people lived below the extreme poverty threshold of $2.15 per day. Using the $4.30 per day vulnerability threshold the number jumps to 120 million people.

Countries in the region have generally followed similar poverty rate patterns. In the immediate transition period of the early 1990s, poverty rates spiked across the region as a result of the transition from a command economy to a free-market economy. The World Bank estimates that by 1999, 150 million people lived below the poverty threshold of $4.30 per day, the majority of whom lived in the five Central Asian republics.

Between 1990 and 2008, as a result of rapid economic growth, 60 million people were able to move out of poverty. However, after the 2008 global financial crisis poverty rates began to increase again along with income inequality despite continuing economic growth. Currently, approximately 67 million people are poor or vulnerable to poverty in the region, almost half of whom reside in Turkey and Kazakhstan. These two countries have also shown the most economic growth and progress in the region. Such high poverty rates correlate with high income inequality, according to the UNDP.

While poverty statistics in the region are generally favorable compared to world averages, the UNDP and World Bank have shared concerns. A significant number of people have been able to move out of poverty, but only slightly above the extreme poverty and vulnerability thresholds.

The UNDP also argues that measures of income poverty are insufficient to grasp the entire picture of vulnerability and social exclusion in these countries. Such measures are unable to measure an individual’s lack of the goods, services and opportunities necessary to live a healthy and fulfilled life, according to the report. Therefore, the UNDP used a social exclusion index in order to measure inequalities and exclusion not captured in the other mechanisms.

One area of significant concern is the declining life expectancy in the region. Since 1960, with the exception of the countries in Southeast Europe, Turkey, Albania and the Former Yugoslav Republics, life expectancy for both men and women have continuously declined almost below world averages. In the Central Asian republics, as of 2012, women live six months less than the world average and in the Southern Caucuses countries both men and women have life expectancies that match the world averages.

In terms of vulnerability, a significant majority of the population in these countries are susceptible to falling back into poverty, with the exception of Ukraine and Belarus which have been successful in almost eradicating extreme poverty. Poverty and vulnerability rates have hardly changed in Albania since the early 1990s, and nearly half the populations of Armenia, Georgia, Kyrgyzstan, Moldova and Tajikistan are impoverished or at-risk.

Such poverty and vulnerability rates concern the UNDP and World Bank as they are significantly higher than poverty rates found in other middle-income countries. Although there seems to be considerable progress, the data collected has significant limitations as it is difficult to collect and compare on an international and regional level. Differences in national and international data also raise questions as to how much progress these countries have made with regard to the Millennium Development Goals. Therefore, the UNDP argues for stronger data collection in the region in the coming years so as to more effectively measure poverty reduction rates and progress with regard to the new and upcoming Sustainable Development Goals.

Erin Sullivan

Sources: UNDP 1, UNDP 2, UNDP 3, UNDP 4, World Bank 1, World Bank 2, World Bank 3
Photo: MaxRes Default

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