Poverty in Armenia has increased this year for the first time in over a decade as a result of the ongoing economic recession, the World Bank said on Tuesday.
In a detailed analysis partly based on government statistics, it estimated that the proportion of Armenians living below the official poverty line reached 28.4 percent in the second quarter of this year. The official poverty rate stood at 25.6 percent during the same period of last year, meaning that the number of poor people has since risen by at least 90,000 since then.
The bank said the level of extreme poverty has nearly doubled to 6.9 percent, or by over 107,000 in absolute terms, on the year-on-year basis. “These developments are a setback for Armenia after a decade of nearly double-digit growth … and reduction in poverty incidence from 56.1 percent in 1998/99 to 23.5 percent in [late] 2008,” it said.
Armenia’s economy contracted by 18.3 percent in January-September 2009, one of the steepest GDP declines in the world. According to the World Bank, poverty was mainly pushed up by the resulting job losses as well as a fall in seasonal migration of labor from the country.
“The data show a significant number of jobs lost, particularly in construction and manufacturing, and a more discouraged work force,” read its analysis. “However, there was no appreciable reduction in wage rates and working hours among those continue to be employed.”
“There were large flows of returning migrants from Russia and other destinations for temporary migration. And migrants who would normally head to Russia during the spring have likely stayed at home,” added the document mainly authored by Lire Ersado, a senior World Bank economist.
Ersado said the poverty rise would have been more drastic without anti-crisis measures taken by the Armenian government. “The coping measures taken by the government and households themselves may have dampened the consequences of the financial crisis,” he told a news conference in Yerevan. “Without that, the poverty increase could have been 7.6 percentage points.”
The government has borrowed more than $1.3bn in emergency loans from the World Bank, the International Monetary Fund and other foreign sources this year to try to finance those measures. That has allowed it, among other things, to mostly offset a serious shortfall in tax revenues resulting from the crisis.
“There is a strong case to be made to increase funding, not cut, for targeted social safety net programs and for other pro-poor spending programs,” said the analysis. It also encouraged the government to carry on with “employment intensive investments” in public infrastructures.