Social Snapshot and Poverty in Armenia

NATIONAL STATISTICAL SERVICE
REPUBLIC OF ARMENIA

Yerevan, November 29, 2011
Press release

Main Findings of the 2010 Integrated Living Conditions Survey

The report Social Snapshot and Poverty in Armenia prepared by the Republic of Armenia National Statistical Service (NSS RA) is aimed at assessing the changes in the social situation and living conditions in Armenia between 2008-2010. This issue is the twelfth in the series of similar reports produced annually by the NSS RA. The main objective of the report, based mainly on the 2010 Integrated Living Conditions Survey (ILCS) data, is to inform the public about the poverty level and social situation in the country.

Starting from January 1, 2007 to January 20, 2012 the ILCS has been co-funded by the RA State Budget and the US Government’s Millennium Challenge Corporation (MCC) funded Millennium Challenge Account-Armenia Program (MCA-Armenia).

Over the last five years MCC’s experts provided guidance on alignment of ILCS population counts with official data on population and ILCS poverty estimates verification based on old methodology. With MCC’s financial assistance the ILCS sample has been re-designed, and the rural sample has been increased to allow the analysis of the impact of MCC’s $177 million  investment in Armenia’s agricultural and water sector.

The goal of the MCA-Armenia Program is the reduction of rural poverty through the rehabilitation of Armenia’s vital irrigation infrastructure, complemented with extensive technical and financial assistance to rural farmers, and to the government irrigation entities that support them.

Whereas the report mainly draws from the findings of the ILCS conducted by the NSS RA, it also uses certain input from the Ministry of Labor and Social Affairs, the Ministry of Health Care, and the Ministry of Education and Science.

The report has been drafted through the analytical and technical assistance of the World Bank. A consumption aggregate is used to approximate well-being in Armenia. Based on the international experience it is assumed that consumption is better declared and is less sensitive to short-term fluctuations than income, especially in transition countries.

The report presents the poverty snapshot in Armenia in 2008-2010. With the technical assistance of the World Bank, the methodology of poverty measurement and analysis has been revised, based on the 2009 data, to reflect changes in household consumption basket over the last several years.  The updated poverty methodology allows for higher poverty lines, as opposed to that based on the 2004 data, underscoring the overall improvements in the living standards and increased importance of non-food consumption expenditures in the household budget. Poverty line in 2010 was computed by using the actual minimum food basket and the estimated share of non-food consumption in 2009.

Poverty Lines and Their Changes, 2008-2010
(per Adult Equivalent, per Month)

(AMD)

Source: ILCS 2008-2010

The poor are defined as those with consumption per adult equivalent below the upper total poverty line; the very poor are defined as those with consumption per adult equivalent below the lower total poverty line, whereas the extremely poor are defined as those with consumption per adult equivalent below the food poverty line. In 2010, the total – both upper and lower – and the extreme poverty lines per adult equivalent per month were estimated to be AMD 33.517 (or USD 89.7), AMD 27.410 (or USD 73.4) and AMD 19.126 (or USD 51.2) respectively.

The report highlights the adverse impacts of the financial, economic, debt, realization and trust crisis that hit hard the Armenian economy starting in the fourth quarter of 2008.Over 2008-2010, the key factor behind the increase in the poverty incidence was the deep recession of the economy in 2009 of 14.1 percent. In 2010, Armenian economy witnessed modest 2.1 percent growth on a year-to-year basis.  In conjunction with the increasing income inequality, deep economic recession contributed to decreased consumption of the population. ILCS 2010 results show that the average monthly real consumption of the whole population decreased by 8 percent as compared to 2008. Such decrease was observed in all quintiles of consumption, except for the 5-th quintile representing the wealthiest layer of population, where consumption growth was observed.  In 2010, both the incidence of poverty and its gap and severity increased as compared to 2008. In 2010, more than third of population (35.8 percent) was poor, 21.3 percent was very poor and 3.0 percent was extremely poor. Just in two years, some 270 thousand people became poor, thus raising the number of the poor in 2010 to around 1.2 million (per resident population), over the same period, some 290 thousand became very poor, thus raising the number of the very poor to 694 thousand. In those two years, around 46 thousand became extremely poor, thus raising the number of the extremely poor in 2010 to around 98 thousand.

The poverty gap of 8.1% indicates that, once the country were to mobilize for each individual (both poor and non-poor) resources equivalent to the poverty line of 8.1% and these resources were allocated to the poor, poverty theoretically would be eliminated, assuming that the assistance aimed for the poor would fully reach them. If calculated as per the poor population only, the poverty gap indicates poverty deficit, i.e. it shows how much the average income (or consumption) of the poor falls short of the poverty line. The severity of poverty (in 2010- 2.5%) indicates inequality among the poor. It takes into account that some poor are further away from the poverty line, while some have consumption much closer to it.

Poverty Indicators, 2008-2010

(in %)

Source: ILCS 2008-2010.
Note: Consumption was measured on per adult equivalent basis.

During 2010, poverty notably increased in Armenia as compared to 2008.
In 2010, extreme poverty incidence demonstrated even a faster increase over the previous year, growing by 1.9 times (or by 1.4 percentage points); for very poor it has grown by increased by 1.7 times (or by 8.7 percentage points), and general poverty grew by 29.7 percent (or by 8.2 percentage points). Poverty in 2010 turned both deeper and more severe. Estimated poverty gap in 2010 was 8.1 percent as compared to 5.1 percent in 2008 (an increase of 1.6 times), whereby the severity of poverty was estimated 2.5 percent as compared to 1.4 percent in 2008 (an increase of 1.9 times).

The deficit of the additional consumption for the poor due to the difference between their actual consumption and the poverty line, in percentage of poverty line, amounted to 22.6 percent.

In 2010, poverty indicators did not significantly differ by urban (35.7 percent) and rural (36.0 percent) areas. Over 2008-2010, poverty incidence in rural areas increased faster than in the urban areas (8.5 vs. 8.1 percentage points). The capital Yerevan had the lowest poverty incidence (27.1%) in the country.  In 2010, poverty in Yerevan as compared to 2008 increased by 7 percentage points, while in other urban areas the increase totaled 9.6 percentage points. In terms of urban-rural differences of welfare, majority of the poor (64.3 percent) were urban residents.

Inequality indicators measured by the Gini coefficient indicate that polarization of population in Armenia is deeper with respect to income distribution than consumption distribution. Consumption inequality measured by the Gini coefficient increased from 0.242 in 2008 to 0.265 in 2010. Income inequality, in turn, increased from 0.339 in 2008 to 0.362 in 2010.

Subjective Assessment of Living Standards
Under the ILCS 2010, members of the surveyed households aged 16 years and above were asked a question about their living conditions.

Poverty is multi-dimensional and can be measured using both objective and subjective approaches. In Armenia, poverty estimates based on subjective perceptions (personal judgment of individuals regarding their own welfare) tended to be lower than those attained using consumption per adult equivalent as an objective welfare measure (14.6% and 35.8% respectively).

Only 2.2% of surveyed households assessed themselves to be extremely poor, as compared to 3.0% when measured using consumption per adult equivalent. Subjective assessments on poverty rates in 2010 were higher than in 2008 (14.6 % in 2010, in comparison with 17.0% in 2008).

The report “Armenia: Social Snapshot and Poverty” is available at the NSS RA`s open library (room No 721).