ARMENIA'S POVERTY RATE FALLS TO 34.6

UNCLAS SECTION 01 OF 02 YEREVAN 000354

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR EUR/CARC, EUR/ACE

E.O. 12958: N/A
TAGS: ECON ELAB EAID PHUM AM
SUBJECT: ARMENIA'S POVERTY RATE FALLS TO 34.6
PERCENT


YEREVAN 00000354 001.2 OF 002


Sensitive but unclassified. Please protect
accordingly.

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SUMMARY
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1. (SBU) According to the National Statistical
Service (NSS),Armenia's poverty rate was 34.6
percent in 2004, down from 56.1 percent in 1998-

1999. The rate of extreme poverty in 2004 was 6.4
percent, down from 21 percent. These findings were
based on an NSS survey supported by the World Bank.
The World Bank, the International Monetary Fund
(IMF),and the NSS have said that the decrease in
poverty rates was due to high rates of economic
growth, improved social policies and increased
remittances. While the number of children living in
poverty decreased, young children remained one of
the most affected groups with 41.9 percent of
children under age five classified as poor. End
Summary.

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POVERTY FALLS TO 34.6 PERCENT
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2. (SBU) According to a National Statistical Service
(NSS) survey, the poverty rate in Armenia fell to
34.6 percent in 2004 compared to 56.1 percent in
1998-1999. The rate of extreme poverty was 6.4
percent, down from 21 percent. The NSS survey
covered the period from April 1, 2004 to March 31,
2005 and included 6,816 households in 43 towns and
216 villages. The last time such an extensive
survey was done was in 1998-1999. The lowest
poverty rate was in Yerevan at 29.2 percent, urban
poverty outside of Yerevan was 43.9 percent, and
rural poverty was 31.7 percent. The highest poverty
rate was in the region effected the 1988 earthquake
(48.8 percent overall poverty and 10.4 percent
extreme poverty). Over the six-year period, the
GOAM shifted the poverty line upward slightly to
account for inflation. In 2004, the poverty line
was AMD 19,373 (approximately USD 43) per month,
compared to AMD 17,663 in 1998-1999 (approximately
USD 33 at the average 1998-1999 exchange rate). The
extreme poverty line in 2004 was AMD 12,467 (USD
23.40),versus AMD 11,210 in 1998-1999
(approximately USD 21.60 at the average 1998-1999
exchange rate).

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DIFFERENT METHODOLOGIES LEAD TO DIFFERENT RESULTS
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3. (SBU) The NSS used a new methodology in 2004
which produced slightly different results than in
previous years. The new methodology increased the
use values allocated to long-life appliances and
adjusted expected consumption rates to differentiate
between children and adults. In order to facilitate
comparison across years, the NSS also issued survey
results using the old methodology under which the
poverty rate in 2004 was 39 percent (down from 43
percent in 2003) and extreme poverty was 7.2 percent
(down from 7.4 percent in 2003). The World Bank
recommended introducing the new methodology in 2003.
When the World Bank used its own methodology to
analyze the 2003 data, it identified a poverty rate
of 32 percent. World Bank Social Affairs expert
Susanna Hairapetyan told us that it would be not
appropriate to compare the Bank's 2003 findings with
the NSS' 2004 results because the methodologies were
dramatically different. She said that the most
appropriate comparison data for the 2004 results was
the 1998-1999 data, and that the Bank was satisfied
with the methodology used by the NSS in 2004 and was
not planning to do a parallel analysis of the data
as it did in 2003.

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CHILDREN LIVING IN POVERTY
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YEREVAN 00000354 002.2 OF 002



4. (SBU) The poverty rates for children under the
age of 17 have decreased since 1998-1999, but still
remain high. Approximately 31.6 percent of children
under the age of 17 live in poverty. The most
affected are children under the age of five, 41.9
percent of whom live in poverty, down from 63.3
percent six years ago. Eight percent of children
under five live in extreme poverty. The majority of
children living in poverty were ages 6 to 14
(181,359) accounting for 36.6 percent of Armenian
children in that age group.

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OBJECTIVE VERSUS SUBJECTIVE ESTIMATES OF POVERTY
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5. (SBU) The NSS report included both objective and
subjective estimates of poverty. According to the
survey, only 17 percent of the people surveyed
thought they were poor and only 3.3 percent thought
that they are extremely poor. Only 0.1 percent of
those surveyed ranked themselves as rich and 3.2
percent said they have an above average living
standard. Thirty-seven percent of those surveyed
said that they had an average standard of living.

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WORKING POOR EMPLOYED PRIMARILY IN INFORMAL SECTOR
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6. (SBU) The results of the survey show that 42.7
percent of the poor population are employed -- 14.6
percent in the formal sector and 28.1 percent in the
informal sector. Fifty-one percent of the employed
work in agriculture (informal sector),and 27.1
percent are involved in services (formal sector).
Fifty-seven percent of poor people do not have jobs
and are not currently looking for jobs.

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COMMENT: THOUGH DECLINING, POVERTY RATE STILL HIGH
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7. (SBU) This survey points to the poor distribution
of Armenia's recent economic growth. Since 1998-
1999, Armenia's GDP has more than doubled. The
poverty line, which is adjusted for inflation, has
increased by less than 10 percent during the same
time period. While poverty and extreme poverty
rates have fallen, this decrease pales in comparison
to Armenia's impressive growth. The urban/rural (or
in Armenia's case Yerevan/not Yerevan) divide can
help explain a portion of this discrepancy.
Economic growth has clearly benefited those living
in the capital more than the rural poor and poor in
other cities. The other extremely troubling result
of this survey is the number of children living in
poverty in Armenia (41.9 percent under age five).
Armenia's middle class is still largely confined to
Yerevan, and we expect little significant change in
the short-term.

EVANS