Social Convergence, Inclusion and Poverty Reduction in Armenia

1. 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

2. 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

3. Maincontributorstopovertyreductionbetween 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%

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

5. Income structure

6. Income and Consumption Inequality trends

7. Impact of social protection expenditures on poverty

8. Private transfers reduce poverty risk but rich benefited more

9. Social convergance in Republic of Armenia (Region/Marze level) Poverty by Region 1999 Poverty by Region2007 STDEV-13.2 Min/Max gap- 46.5 percentage points STDEV-5.5 Min/Max gap-18.4 percentage points

10. Projected Impact of SDP social protection policieson poverty Actual SDP Projections

11. 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

12. Poverty challenges posed by the crisis First Scenario Second Scenario

13. Thank you