The Problem of Overcoming Poverty in Post-Soviet Georgia

A new goal was set in the Global Monitoring Report 2014/2015 commissioned by the World Bank and International Monetary Fund. Ensuring accelerated improvement of welfare for the poorest 40 percent of the population and ending extreme poverty by 2030 – this is a task common to all mankind. In addition, depending on the countries’ natural and production peculiarities, demographic conditions and economic characteristics, ending poverty, as a global challenge, requires both complex and differentiated approaches.  

Accordingly, from our point of view, it’s important to discuss the causes, characteristics and tendencies of poverty and the ways how to solve the problem. We’d discuss the issue on the example of Georgia, one of the post-Soviet country, for which the task of overcoming the poverty is of national importance. 

In the period of transition to market economy the process of absolute and relative impoverishment got deeper for most part of Georgian population. The level of poverty (as a share of subsistence minimum) was 80% in 1994, 46.2% in 1997, 51.8% in 2000 and 52% in 2004. It should be noted as well that subsistence minimum calculation methodology has changed since 2004. Previous normative and statistical methodology (based on the consumption of 2500 calories and minimal amount of non-food products) was changed with statistical methodology (which is based on the actual minimum consumption of the poorest 10 percent of the population). Such change caused adjustment (reduction) of previous indicators. For instance, poverty rate, which was 52 percent in 2004 got 35.7%. Poverty rate, calculated by the new methodology, amounted to 21.3 percent in 2007 while according to the World Bank in the same year, 50% of Georgian population was poor and 17% was the extremely poor. According to the official data, in 2012 9.7% of the population of Georgia lived below the poverty line, 21.4 % were below 60% of median consumption and 8.4%  - below 40% of median consumption.

Food consumption rate has dramatically reduced. The Gini coefficient was 0.42. Deepening of the social differentiation resulted in the disproportion in income distribution. Characteristic was observed – formation of the upper class on the background of economic devastation and on the other hand, impoverishment of the most part of population. The middle class was only 10% of the population. In 2010 correlation of decile groups was 18.1 (this is the worst indicator among post-Soviet countries). The official unemployment rate was 15.2% (2012), while according to experts it is almost two times higher. Migration rate for working people is high as well (Georgia holds 31^st position among 220 countries).