The notable improvements that the people of the South Caucasus have experienced are reflected in better living standards that allowed poverty to be reduced by half in the 12 years between 2005 and 2017. Yet in order to consolidate the middle class, the governments of Armenia, Azerbaijan and Georgia need to do more to achieve the stability and resilience accomplished by their more successful peers in Europe and Central Asia, according to a new World Bank report South Caucasus in Motion.
The report explores poverty and inequality in the South Caucasus through the lens of mobility. It analyzes a variety of information sources, including household budget and perceptions surveys, administrative records on public services, international standardized test results, and even night-time light emission data. Together, these data provide a convincing body of evidence on the constraints on social, economic and spatial mobility.
“Georgia has made significant economic progress and reduced poverty over the last two decades. To sustain growth, poverty reduction and the consolidation of the middle class would require securing the institutional and physical foundations of greater economic and social mobility for every district and region,”says Mercy Tembon, the World Bank Regional Director for the South Caucasus.
The report argues that vulnerability is still a challenge, and while many households have benefited temporarily from increases in income, many of them have fallen back into poverty. Difficult geographical characteristics, the relatively small size of the economies, lack of diversification, and demographic challenges associated with emigration and low fertility rates, combined with exposure to macroeconomic risks, pose serious problems. Efficiency in the allocation of economic resources and dynamism in economic sectors are, therefore, essential for sustainable growth, poverty reduction, and shared prosperity in Georgia and the rest of the region.
The report ultimately defined a roadmap for improving mobility in the South Caucasus in three steps:
1) Help raise economic activity, market potential and people’s ability to participate in regional development by improving transport connections and provision of basic services;
2) Invest in human capital by improving learning outcomes and skills through ensuring effective access and equity in key enablers such as high-quality education.;
3) Consolidate the economic stability of the middle class through policies aimed at improving household resilience to adverse shocks and income fluctuations by expanding targeted social assistance and pension systems and improving access to financial markets.