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Growth, Poverty, Inequality in ECA

Eastern Europe and the Former Soviet Union

Report's Team Leader: Asad Alam
October 2005
Eastern Europe and the Former Soviet Union have witnessed a significant decrease in poverty since the Russian financial crisis of 1998-99. Almost 40 million people moved out of poverty from 1998-2003. Three key factors contributed to poverty reduction: growth in wages, growth in employment, and more adequate social transfers. But poverty and vulnerability persist: more than 60 million people live on less than $2 a day.

In their recommendations, the report's authors urge countries to continue with enterprise sector reforms, boost rural growth, promote opportunities in lagging regions, increase access to good quality basic services, and produce better social safety nets especially for the working poor and children.

1. Nature and Evolution of Poverty, 1998-2003

This chapter describes recent trends in poverty and inequality across the region. It also provides data derived from representative household surveys on consumption. An absolute poverty line of $2 a day is used for most countries, given the cost of heating and warm clothing required for the cold climate.

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2. How Has Poverty Responded to Growth?

This chapter elaborates on the role of growth and changes in distribution in reducing poverty in the Region. The resurgence in growth during 1998-2003 was driven largely by countries belonging to the Commonwealth of Independent States. At the same time, European Union integration helped to broaden markets and lock-in reforms for acceding countries. The end of the war in the Western Balkans made the economic environment more conducive for investment and growth.

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3. The Role of Labor Markets and Safety Nets

This chapter provides a comprehensive analysis of policy actions needed to spur job creation. It recommends raising productivity and employment; boosting rural growth; and promoting opportunity in lagging regions.

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4. Affordable Access to Quality services

There is an enormous need in the Region for better social protection, efficient government reforms, access to education, health care, safe water, sanitation and heating. Fiscal commitment, efficiency gains, improved governance and better risk management will be critical for the poor.

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5. Prospects for Poverty Reduction

Poverty and vulnerability still remain a significant problem: more than 60 million people are poor, and more than 150 million are vulnerable to economic downturns. Most of the poor are working poor. If growing inequalities in the quality of basic services are not reversed, they will weaken the beneficial effects of growth.

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