PART I: ARMENIA – POVERTY SNAPSHOT OVER 2008-2017  Chapter 1: Demographics and Migration Adverse demographic developments in Armenia over the 1990’s driven by decreasing fertility rates, increasing mortality rates, as well as intensive out-migration of the population, whereas somehow slowed down in 2000’s, are still in place. The results of the censuses in 2001 and 2011 show that the number of permanent population has decreased by around 195 thousand or 6%. This reflects the natural growth of population (the difference in the number of births and deaths) at around 126 thousand, and the net migration (the difference in the number of arrivals and departures) at around -330 thousand within the period between two censuses (2001-2011). In the period from 2012 to the beginning of 2018, the number of population has decreased by 1.6%, thus constituting an average annual decrease of 0.4%. 1.1 Population Number Dynamics Current estimates of population are achieved through the number of permanent population1, based on the results of the most recent Census 2011, and are updated on quarterly basis. As of January 1, 2018, permanent population of Armenia was 2972.7 thousand, that is less by 13.4 thousand compared to the beginning of 2017 (Table 1.1), which is a reflection of the natural population growth and the (estimated2) net migration. Table 1.1 – Armenia: Factors of Permanent Population Number Dynamics, 2012-2018 Population number, Total growth/ reduction Natural growth Net migration2 beginning of year (+ , -) 2012 3 021.4 14.9 -9.4 5.5 2013 3 026.9 14.6 -24.4 -9.8 2014 3 017.1 15.3 -21.8 -6.5 2015 3 010.6 13.9 -25.9 -12.0 2016 2 998.6 12.4 -24.8 -12.4 2017 2 986.1 10.6 -24.0 -13.4 2018 2 972.7 Source: RA SC Within permanent population as of the beginning of 2018, the share of urban residents was 63.8% and that of rural residents was 36.2%. As of the beginning of 2018, permanent population in Armenia was comprised of 47.4% males and 52.6% females. At that, the average age of the population was 36.4 years with a gender difference of 3.7 years, i.e. average age of males was 34.5 years and that of females was 38.2 years. 1According to the results of Census 2011 (October 12-21, 2011), the number of permanent (de jure) population was 3 018 854, and that of current (de facto) population was 2 871 771. 2 The estimates have been revised (adjusted) on basis of the findings of the Integrated Living Conditions Survey for the previous year and reflect the impact of migration processes; for detailed methodological clarifications please see http://www.armstat.am/am/?nid=82&id=1547. 20 Table 1.2 – Armenia: Permanent population, 1990-2018 (As of the beginning of year) Total population Share in total population, percent Years (in thousands) Urban Rural 1990 3 514.9 68.8 31.2 1993 3 463.7 68.1 31.9 1996 3 248.8 66.2 33.8 1999 3 232.1 65.3 34.7 2001* 3 213.0 64.3 35.7 2011* 3 018.9 63.3 36.7 2012 3 021.4 63.3 36.7 2013 3 026.9 63.3 36.7 2014 3 017.1 63.4 36.6 2015 3 010.6 63.5 36.5 2016 2 998.6 63.6 36.4 2017 2 986.1 63.7 36.3 2018 2 972.7 63.8 36.2 Source: RA SC Note: Asterisk (*) denotes years of population censuses Natural movement of population Economic, social, and political uncertainties in Armenia since 1990’s affected in the population’s reproductive behavior. Thus, in 2017 the total birthrate per 1.000 residents was 12.6 per mille against 13.5 per mille in 2016. Fertility rate (aggregate birthrate) in 2017 was 1.576 children per 1.000 females of fertile age (15-49 years) against 1.647 in 2016. This was significantly lower than the fertility rate 2.150 needed for simple reproduction of population1. In 2017, the gross reproduction rate of population (the average number of daughters that would be born to a female in fertile age, provided that the birthrate for the given year remained unchanged) was 0.752, whereas the net reproduction rate (the average number of daughters that would be born to a female and live until the age of their mother at the moment of giving birth to them, provided that the female passed through her lifetime conforming to age-specific fertility and mortality rates of the given years) was 0.722. 1 Simple reproduction is achieved when the generation of children coming to replace their parents and the generation of parents are equal in terms of absolute numbers. 21 Table 1.3 – Armenia: Fertility Rates by Age Groups, 1997-2017 Years Average number of births, per 1.000 women of relevant age 15-19 20-24 25-29 30-34 35-59 40-44 45-49 15-49 Total 1997 50.2 149.6 80.3 36.5 15.4 3.8 0.3 49.3 Urban 38.5 137.0 79.7 36.9 15.1 3.8 0.3 43.9 Rural 73.9 175.1 81.4 35.8 15.9 3.8 0.3 61.3 Total 2007 24.4 113.7 84.0 38.4 12.2 2.4 0.2 44.1 Urban 17.9 92.4 80.7 41.9 15.1 2.8 0.2 42.3 Rural 37.3 172.8 92.9 31.3 7.7 1.8 0.2 47.5 Total 2016 24.1 114.7 101.5 58.9 24.6 5.1 0.4 52.7 Urban 18.2 108.8 110.8 66.3 28.1 6.2 0.6 54.0 Rural 32.7 123.3 85.8 44.5 17.3 3.0 0.2 50.4 Total 2017 21.1 110.5 97.1 56.1 25.1 4.7 0.5 49.5 Urban 14.5 106.8 105.8 63.1 28.7 5.8 0.7 50.8 Rural 31.1 115.6 82.9 42.9 17.8 2.6 0.1 47.4 Source: RA SC Graph 1.1 – Armenia: Dynamics of Fertility Rates by Age Groups, 1997-2017 (percent) Source: RA SC In 2017, the average age of mother at childbirth was 27.0 years; that at the first childbirth was 24.8 years against, respectively, 26.8 and 24.7 years in 2016. By the sequence of birth, in 2017 the third and subsequent births comprised 22.3% of the total number of live births in the country, which comprised a 3.0 percentage point increase on the previous year (Table 1.4). 22 Table 1.4 – Armenia: Birth Distribution by Sequence (person) Including, by sequence of birth Year Total births First Second Third Fourth Fifth and more 2000 34 276 15 637 11 155 5 085 1 167 762 2006 37 639 19 601 13 271 3 758 705 304 2010 44 825 21 954 15 881 5 683 929 378 2011 43 340 21 344 15 377 5 369 899 351 2012 42 480 20 453 15 481 5 352 874 320 2013 41 790 19 466 15 651 5 477 852 344 2014 43 031 19 548 16 051 6 171 929 332 2015 41 763 17 971 15 850 6 498 1 059 385 2016 40 592 17 711 15 032 6 454 1 040 355 2017 37 700 15 071 14 234 6 865 1 133 397 Source: RA SC 33.0% of live births in 2017 were to non-registered marriages (including extra-marital births), against 35.5% in 2007 and 32.4% in 1997. In 2017, the number of deaths decreased by 3.8% compared to the previous year, and the total mortality rate decreased by 0.3 per mille points down to 9.1 per mille. At that, the mortality rate in urban communities at 9.2 per mille was relatively higher than that in rural communities at 9.0 per mille. Table 1.5 – Armenia: Births and Deaths, 1997-2017 Birth Death In thousands Per 1.000 residents In thousands Per 1.000 residents Total Urban Rural Total Urban Rural Total Urban Rural Total Urban Rural 1997 43.9 26.9 17.0 13.5 12.6 15.3 24.0 15.8 8.2 7.4 7.4 6.9 2000 34.3 21.4 12.9 10.6 10.3 11.4 24.0 15.7 8.3 7.5 7.5 7.3 2006 37.6 23.8 13.8 12.0 11.9 12.2 27.2 17.7 9.5 8.7 8.9 8.4 2007 40.1 25.5 14.6 12.9 12.9 13.0 26.8 17.2 9.6 8.6 8.7 8.6 2008 41.2 26.2 15.0 13.3 13.3 13.4 27.4 17.9 9.9 8.9 8.9 8.9 2009 44.4 28.3 16.1 14.5 14.5 14.5 27.6 17.5 10.1 9.0 8.9 9.1 2010 44.8 28.2 16.6 14.7 14.6 14.9 27.9 17.8 10.1 9.2 9.2 9.1 2011 43.3 27.6 15.7 14.3 14.4 14.2 28.0 17.8 10.2 9.2 9.3 9.1 2012 42.5 27.1 15.4 14.0 14.2 13.8 27.6 17.6 10.0 9.1 9.2 9.0 2013 41.8 26.8 15.0 13.8 14.0 13.6 27.2 17.4 9.8 9.0 9.1 8.9 2014 43.0 27.8 15.2 14.3 14.6 13.8 27.7 17.6 10.1 9.2 9.2 9.2 2015 41.7 27.1 14.6 13.9 14.2 13.4 27.9 17.7 10.1 9.3 9.3 9.3 2016 40.6 26.5 14.1 13.5 13.9 13.0 28.2 18.3 9.9 9.4 9.6 9.2 2017 37.7 24.6 13.1 12.6 13.0 12.1 27.1 17.4 9.7 9.1 9.2 9.0 Source: RA SC Note: For 2006-2011, rates are adjusted for revised estimates of permanent population based on the results of the Census 2011. For natural population flow by regions see Table A1.1 in the Statistical Annex. Within the structure of mortality in 2017, males comprised 51.0% and females comprised 49.0% against, respectively, 51.9% and 48.1% in 2007. Given the difference in mortality rates between males and females, their average life expectancy rates also differ. In 2017, the average life expectancy rate was 71.9 23 years for males and 78.7 years for females. The corresponding indicators were 72.0 for males and 78.8 for females in urban communities, and 71.6 and 78.4 years in rural communities. Main causes of mortality: Diseases related to blood circulatory system and malignant tumor accounting for more than two thirds of death record dominated in the structure of mortality. Table 1.6 – Armenia: Mortality Rates, by Main Cause of Death, 2017 Total number of deaths Mortality rate, per Cause of death (person) 100 000 residents Male Female Male Female Number of deaths 13 841 13 316 979.2 850.3 Of which, by causes: Blood circulatory system diseases 7 178 7 928 507.8 506.3 Malignant tumor 3 104 2 446 219.6 156.2 Endocrine system diseases 337 516 23.8 33.0 Exogenous reasons (accident, intoxication, injury etc.) 782 260 55.3 16.6 Respiratory system diseases 812 832 57.4 53.1 Digestive system diseases 841 702 59.5 44.8 Urogenital system diseases 172 136 12.2 8.7 Infectious and parasitic diseases 144 50 10.2 3.2 Other diseases 471 446 33.4 28.4 Source: RA SC The difference between birth and death numbers constituted the natural growth of population at 10.6 thousand in 2017 against 12.4 thousand in 2016 (13.3 thousand in 2007 and 19.9 thousand in 1997). The natural growth of population in 2017 was 3.5 per mille constituting a 0.6 per mille point decrease from the previous year. Migration: According to ILCS 2017, 22.2% of households had members aged 15 years and above involved in external and internal migration processes over the period of 2014-2017; this constituted 10.4% of household members of that age group. 24 Table 1.7 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, by Yerevan and Regions (percent) Involvement in migration processes Migrated and not Migrated and Arrived at location for Total returned returned the first time Yerevan 14.4 28.5 67.3 20.9 Aragatsotn 7.8 1.3 - 8.0 Ararat 9.6 7.1 - 8.6 Armavir 6.9 5.9 5.3 6.7 Gegharkunik 11.1 7.2 - 8.7 Lori 13.6 15.3 - 13.3 Kotayk 8.4 11.5 14.3 9.0 Shirak 15.4 13.5 - 13.9 Syunik 2.6 0.7 0.8 1.9 Vayotz Dzor 3.5 3.0 1.3 2.9 Tavush 6.7 6.1 11.0 6.1 Total 100 100 100 100 Source: ILCS 2017 Table 1.8 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, by Gender and Urban/ Rural Population (percent) Male Female Total Urban Rural Returned 76.0 24.0 100 61.0 39.0 Not returned 85.8 14.2 100 44.9 55.1 Total 83.3 16.7 100 51.1 48.9 Source: ILCS 2017 Graph 1.2 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, by Age Group Non-returned member Returned member 2.3 65+ 13.2 17.6 50-64 21.7 36.8 32.0 30-49 48.1 15-29 28.3 50 40 30 20 10 0 0 10 20 30 40 Source: ILCS 2017 25 Among household members aged 15 years and above, who were involved in migration processes over the period of 2014-2017, 52.4% (around 137 thousand persons) were still absent from the household as of 2017 and resided either in other regions of the country, in Yerevan, in other communities within their region, or in other countries; 32.8% (around 86 thousand persons) had returned from migration, and 2.0% (around 5.2 thousand persons) had arrived at the particular location for the first time. Table 1.9 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, by Involvement Status Involvement Percent of total 1. Yes, migrated and not returned 52.4 2. Yes, migrated and returned after absence of less than 3 months 12.2 3. Yes, migrated and returned after absence of 3-11 months 17.4 4. Yes, migrated and returned after absence of 12 and more months 3.2 5. Arrived at the location for the first time 2.0 6. Not indicated 12.8 Total 100 Source: ILCS 2017 In 2017 among households with members aged 15 years and above, who were involved in external and internal migration processes over the considered period, 13.9% were in internal migration in Yerevan and regions of Armenia, 10.5% in the Republic of Artzakh, and 76.6% were in interstate migration, with the overwhelming 78.2% majority having migrated to the Russian Federation (Table 1.10). Table 1.10 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, by Reasons for Migrating/Returning, and by Point of Destination/ Return, 2017 (percent) Main reason for migrating/ Point of destination/ return returning Regions in Other CIS Yerev Republic of Russian Yerevan Other Total Armenia Artzakh Federation country an 1. Need to/ search for work 1.9 1.7 0.9 91.8 1.5 1.1 1.1 100 2. Family circumstances 7.7 9.6 1.6 76.3 1.7 1.0 2.1 100 3. Residence 7.9 8.5 1.6 50.3 2.8 25.8 3.1 100 4. Private visit to friends/ relatives 5.0 8.9 2.8 65.3 2.6 8.5 6.9 100 5. Tourism 0 0 0.0 14.4 29.1 10.7 45.8 100 6. Study/ training 75.3 9.3 0.0 4.2 0.0 6.0 5.2 100 7. Business 0 0 11.7 43.0 13.9 20.1 11.3 100 8. Employment ended 1.1 0.6 0.7 94.8 2.8 0.0 0.0 100 9. Other 3.9 22.2 65.7 7.1 0.0 0.5 0.6 100 Total 7.3 6.6 10.5 67.3 2.0 3.6 2.7 100 Source: ILCS 2017 Among household members aged 15 and above, who were involved in migration processes over the period of 2014-2017 and had returned as of 2017, 90% were absent for less than one year (including 26 37.1% who were absent for a period of three months or less), and 10% were absent for one year and more. Table 1.11 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, Those Having Returned as of 2017, by Reasons for Returning and by Duration of Absence (percent) Duration of absence Main reason for returning Total ≤3months 4 -11 months ≥ 12 months 1. Need to/ search for work 6.8 33.7 8.8 21.3 2. Family circumstances 16.0 19.1 25.1 18.6 3. Residence 2.0 0.7 9.5 2.1 4. Private visit to friends/ relatives 46.1 8.7 1.5 21.8 5. Tourism 15.7 0.1 - 5.8 6. Study/ training 1.5 2.2 0.8 1.8 7. Business 4.5 0.2 1.3 1.9 8. Employment ended 4.1 32.0 6.8 19.1 9. Other 3.3 3.3 46.2 7.6 Total 100 100 100 100 Source: ILCS 2017 7.4% of household members returned from intra-country migration, 74.4% – from the Russian Federation, 5.9%- from Republic of Artzakh, 3.4% – from other CIS countries, 3.3% – from European countries. Graph 1.3 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, Those Having Returned as of 2017, by Point of Return Source: ILCS 2017 27 Table 1.12 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, Those Not Having Returned as of 2017, by Duration of Absence (percent) Duration of absence Main reason for migrating Total ≤3months 4 -11months ≥ 12 months 1. Need to/ search for work 69.3 66.8 48.3 64.3 2. Family circumstances 3.3 3.8 1.7 3.3 3. Residence 0.9 2.0 12.2 3.5 4. Private visit to friends/ relatives 3.8 1.6 0.4 2.1 5. Tourism 0.0 0.2 0.0 0.1 6. Study/ training 13.5 8.4 0.7 8.5 7. Other 9.2 17.2 36.7 18.2 Total 100 100 100 100 Source: ILCS 2017 Among household members aged 15 and above, who left the place of their permanent residence over the period of 2014-2017 and had not returned as of 2017, 30.8% were absent for less than 3 months, 51.3% – for 4-11 months, and 17.9% – for one year and more. Graph 1.4 – Armenia: 2014-2017 Migration Involvement of Household Members Aged 15 and Above, Those Not Having Returned as of 2017, by Point of Destination and Gender Source: ILCS 2017 Among household members aged 15 and above, who left the place of their permanent residence over the period of 2014-2017 for 3 months and more and had not returned as of 2017, 16% resided within the 28 country (in Yerevan and regions), 13.4% in the Republic of Artzakh, and 70,6% in other countries, predominantly in the Russian Federation. Household members aged 15 and above, who were involved in external migration processes (excluding intra-country movements) over the period of 2014-2017 for 3 months and more and had not returned as of 2017, around 70% were absent from the country for 3-11 months, and 30% – for one year and more. According to the UN methodology, within the considered period (2014-2017) external migrants constituted around 85% (around 90 thousand persons) of those household members who, by the record date, were absent from (had not returned to) the country for 3 months and more. Among them, short- term migrants with a duration of absence 3-11 months (except for those having left for recreation, visits to friends/relatives, holidays, business trips, medical treatment or religious pilgrimage) comprised 65%, and long-term migrants with a duration of absence one year and more comprised 35%. According to survey findings, the average annual estimated number of household members aged 15 years and above, who were involved in migration processes over the period of 2014-2017 for 3 months and more and had not returned as of 2017 totaled around 22.5 thousand. Moreover, survey findings showed that in 2017 surveyed households also had around 3.6 thousand members aged 0-15 years, who were absent (for 3 months and more). More than 50% of migrant household members aged 15 years and above sent money and/ or goods to their families and/ or friends/ relatives within the 12 months preceding the survey. 1.2 Age Structure and Household Composition Age structure of the population of Armenia has significantly changed over the period of 1997-2018 due to both decreased birthrates, relatively high life expectancy at birth for both males and females, as well as by the expressly male-dominated out-migration processes characteristic for Armenia (Graph 1.5). The share of children below 16 dropped from 26.3% as at the Census 2001 to 20.2% as at the Census 2011. The share of working age population (16-62 years) increased from 62.1% in 2001 to 67.8% in 2011, while that of the population above the working age (63 years and more) increased, respectively, from 11.6% to 12.0%. According to current records on the number of permanent population based on the results of the Census 2011, as of the beginning of 2018 working age population (16-62 years) constituted 65.1%, those below the working age (0-15 years) – 21.3%, and those above the working age (63 years and more) – 13.6% of the population. In Armenia, the share of the elderly and the underage (0-15 years) individuals in 2018 constituted 537 – against the previous year’s 521 – per 1000 working age residents. 29 Graph 1.5 – Armenia: Age Structure of Population, 1997-20181 (As at beginning of year) 1) For comparability purposes, the indicators were calculated for currently defined pension age groups. Source: RA SC According to survey findings, in 2017 the average number of household members was 3.6 per permanent population, with 3.4 in urban communities and 4.1 in rural communities; and the corresponding indicators per present population were 3.4, 3.2 and 3.8, respectively. In 2017, the share of households with three or less members was 49.0% against 38.2% in 2010 and 46.9% in 2016 (Table 1.13). Large households (with six and more members) mainly lived in rural communities – comprising a share of 25.1%, against those living in urban communities – comprising a share of 13.2%. In Armenia, the majority of urban households had four or less members; the share of such households was 73.4% in urban communities and 57.6% in rural communities. Table 1.13 – Armenia: Households by Composition (per Permanent Population), 2010-2017 Percent of total Household composition 2010 2012 2013 2014 2015 2016 2017 Households, by number of 100.0 100.0 100.0 100.0 100.0 100.0 100.0 members: 1 member 10.0 10.9 12.5 12.9 14.1 13.8 14.8 2 members 14.0 16.1 16.7 17.1 17.7 17.4 19.1 3 members 14.2 15.0 15.2 14.1 15.2 15.7 15.1 4 members 21.0 20.6 19.0 19.8 19.2 19.7 18.9 5 members 18.0 16.5 16.1 15.7 15.4 15.2 14.8 6 and more members 22.8 20.9 20.5 20.4 18.4 18.2 17.3 Source: ILCS 2010-2017 In 2017, the share of households without children below 16 years old has increased significantly as compared to the last year (by 2.9 percentage points). It has increased by 7.2 percentage points as compared to 2010 data and reached to 60.6%. Their share in urban areas made 62.8% and in rural areas it 30 was 56.4% as compared to 54.6% in 2010 and 50.9%, respectively. The share of households with 1, 2 and 3 children has decreased by 0.7, 2.1 and 0.2 percentage points, respectively. And the share of households with 4 children has increased by 0.1 percentage points (Table 1.14). Table 1.14 – Armenia: Households with Children below 16 (per Permanent Population), 2010-2017 Percent of total Household composition 2010 2012 2013 2014 2015 2016 2017 Households, by number of 100.0 100.0 100.0 100.0 100.0 100.0 100.0 children: 1 child 19.9 18.5 18.3 18.1 17.3 17.0 16.3 2 children 20.0 18.2 19.0 18.5 20.3 19.2 17.1 3 children 5.3 5.0 4.4 5.2 4.4 5.2 5.0 4 children 1.0 0.7 0.8 0.8 0.7 0.7 0.8 5 and more children 0.4 0.4 0.3 0.2 0.2 0.2 0.2 No children 53.4 57.2 57.2 57.2 57.1 57.7 60.6 Source: ILCS 2010-2017 65.7% majority of households in the country were male-headed; female-headed households comprised 34.3% (respectively, 37.7% in urban communities and 27.8% in rural communities). On average, each female-headed household accounted for 0.29 children below 16 years, and each male- headed household accounted for 0.45 children below 16 years in 2017. In 2017, the number of registered marriages was 15 214 against 16294 in 2016, 18 145 in 2007, and 12 521 in 1997. Compared to the previous year, the number of divorces in 2017 increased by 8.0% up to 3 940 cases, with total divorce rate at 1.3‰. The average age of marriage in 2017 was 31.1 years for males and 27.5 years for females1 against, respectively, 30.8 years and 27.2 years in 2016. The average age of the first marriage was 29.9 years for males and 26.6 years for females against, respectively, 29.6 years and 26.4 years in 2016. 1 It is worth of mentioning that both the average age of marriage and the average age of the first marriage are higher than the average age of mother at childbirth (27.0 years) and at the first childbirth (24.8 years). This reflects the fact that the estimates are based on the number of registered marriages, whereas registration itself occurs with certain delay after the child is born; besides, there are cases of second and further marriages registered at later ages. 31 Chapter 2: Overview of Economic Developments in Armenia over 2008-2017 2.1 Macroeconomic Environment The global economic crisis in 2008 hit the Armenian economy. Whereas the stable economic environment at the time, including the low level of debt, increasing level of savings and prudent fiscal positions safeguarded the economy against the initial influence of the global recession, the effects of the decline in external demand and capital inflows became visible since the fourth quarter of 2008, when the country experienced 5.9% economic recession and 6.9% annual GDP growth, as opposed to the two- digit growth of GDP at 13.7% back in 2007. Investments shrunk at a faster pace, and the sector of residential construction was the first among those suffering because of abrupt deterioration of the economic environment. Relevant economic indicators evidenced a deep recession of the economy in 2009. 14.1% downturn of the GDP in that year was followed by slow recovery since 2010 (in comparison with the previous year, GDP grew by 2.2% in 2010 and by 4.7% in 2011). There was a rather significant 7.2% growth of GDP in 2012 as well; however, it still was not sufficient for achieving the level of economic activity in 2008. In 20131 similar trends of economic development were observed, however at a slower pace (with 3.3% economic growth over the previous year) mainly due to the recession in the construction sector. In 2014, despite the acceleration trends of economic growth in the first three quarters, the end of the year saw slower economic growth rates, resulting in 3.6% annual growth. Over 2015-2017 economic growth was mainly driven by slower growth in external demand, exchange rate devaluation, and slower increase of disposable income due to downsized inflows of monetary remittances from Russia. Substantial changes occurred in the structure of the GDP due to the promotion of agricultural supply, investments in industrial enterprises, modification of the tax policy, deferral of the payment of value added tax and increased salaries. In contrast to the high growth rate in construction sector as of 2008, which provided 39.1% of GDP growth and comprised 25.3% share in the GDP structure, the significant drop in construction volumes in 2009 (by 41.6%), which made up 74.3% of the GDP decline, led to its decreased share in the GDP down to 18.6%. Compared to 2009, the 3.3% growth of construction in 2010 was followed by significant drops of 12.2% in 2011, 7.4% in 2013, 4.5% in 2014, 3.1% in 2015 and 14.1% in 2016. In 2017, 2.5% year-on- 1 Starting from 2015, the SC calculates the GDP in accordance with the System of National Accounts (SNA 2008) international standard, also revising the 2012-2014 GDP figures accordingly. In this report, data on the 2013-2017 GDP and economic growth are calculated in accordance with the SNA 2008. 32 year economic growth was recorded in the construction sector, which, however, had no effect on the background of recession dynamics over the previous years. As a result, the share of construction in GDP reduced to 9.4% in 2015 and comprised 7.4% in 2017 (Table 2.1). Table 2.1 – Armenia: GDP Structure, Real Volume Indexes, and GDP Growth Contribution Shares through Production Method, by Large Groups of Economic Activity Classification (NACE, rev. 2), 2014-20171 Code Real volume indexes GDP growth under GDP structure, percent relative to previous contribution share, NACE, year, percent percentage point rev.2 2014 2015 2016 20172 2015 2016 20172 2015 2016 20172 Domestic product (gross, 100.0 100.0 100.0 100.0 103.2 100.2 107.5 3.2 0.2 7.5 at market prices) Taxes on products (less 11.3 10.6 10.0 10.3 94.9 96.3 110.1 -0.6 -0.4 1.0 subsidies) Added value (gross, at 88.7 89.4 90.0 89.7 104.3 100.6 107.2 3.8 0.6 6.5 basic prices) Indirectly measured financial intermediation -2.1 -1.8 -1.9 -1.9 87.5 108.7 104.2 0.3 -0.2 -0.1 services Agriculture, hunting and A forestry, fishing, fish 18.1 17.2 16.4 14.9 113.2 95.0 94.7 2.4 -0.9 -0.9 breeding B+C+D Industry, including 16.0 16.3 17.9 17.9 106.2 107.7 106.6 1.0 1.3 1.2 +E energy sector F Construction 9.3 9.4 7.8 7.4 96.9 85.9 102.5 -0.3 -1.3 0.2 G+H+I+ J+K+L+ M+N+O Trade and services 47.4 48.3 49.8 51.4 101.0 103.4 112.1 0.4 1.7 6.1 +P+Q+ R+S+T Source: RA SC 6.3% economic growth in the industrial sector in 2013 was followed by 0.9% recession in 2014 mainly due to deteriorated performance in activities such as the supply of electricity, natural gas, steam and improved air, shaft and open-pit mining. Over 2015-2017, significant economic growth amounting, respectively, 6.2%, 7.7% and 6.6% was recorded in this sector. Industrial and service sectors contributed to the economic growth with 0.2% in 2016 and 7.5% in 2017. In the industrial sector the growth was driven by the processing industry and mining, which grew by, respectively, 11.1% and 5.9% in 2016; and by 5.9% and 18.2% in 2017. The reduction in agricultural sector (12%), including the subsectors of forestry, fishing and fish breeding, due to unfavorable climatic conditions in 2010 was followed by certain growth over the next years. Compared to 2012, growth amounted 29.2% in 2015 making 18.4% share of the GDP in 2013. Over 2016-2017, this picture certainly changed in view of negative growth dynamics, which resulted in 1 Calculated in accordance with the SNA 2008 2 Preliminary data 33 economic recession amounting, respectively, 5.0% and 5.3% with a decreased share of the sector in GDP down to 14.9% in 2017. Along with the economic growth over 2012-2014, there was a noticeable increase of the level of final consumption in the economy relative to the GDP at an average 98.3%; however, this indicator slowed down over 2015-2017 to an average 91.2%. Over the period of 2012-2014, the Armenian national currency depreciated relative to the US dollar and other foreign currencies, reflecting the reduction of private transfers and direct foreign investments. Table 2.2 – Armenia: Macroeconomic Indicators, 2014-2017 2014 2015 2016 20171 Nominal GDP (AMD billion) 2 4 828.6 5 043.6 5 067.3 5568.9 Nominal GDP (USD million)2 11 609.5 10 553.3 10 546.1 11 536.5 Real GDP growth (annual percentage change) 2 3.6 3.2 0.2 7.5 Real GDP growth relative to 2012 (percentage change) 2 7.0 10.4 10.7 19.0 USD/ AMD exchange rate (period average) 415.92 477.92 480.49 482.72 Unemployment rate (percent) 17.6 18.5 18.0 17.8 Average monthly nominal wages (AMD) 158 580 171 615 174 445 177 817 Inflation (average annual) 3.0 3.7 -1.4 1.0 Consolidated budget expenditures (percent of GDP) 26.3 28.6 29.3 27.7 Consolidated budget deficit (percent of GDP) 1.9 4.8 5.5 4.8 Source: RA SC Table 2.3 – Armenia: Aggregate Indicators of Consolidated Budget, 2012-2017 (percent of GDP2) 2012 2013 2014 2015 2016 2017 Total revenues and official transfers 22.9 24.2 24.4 23.8 23.8 22.9 Of which, taxes and duties 21.1 22.4 22.5 21.6 21.8 21.3 Total expenditures 24.3 25.7 26.3 28.6 29.2 27.7 Deficit 1.4 1.5 1.9 4.8 5.5 4.8 Source: RA SC Over 2013-2017, the share of actual spending on social sectors within consolidated budget expenditures did not exceed its 2012 level at 50.3% (Table 2.4). It declined to 44.9% in 2013, raised to 47.6% in 2014, and declined to, respectively, 46.7%, 46.3% and 45.3% over 2015-2017. 1 Preliminary data 2 Calculated in accordance with the SNA 2008 34 Table 2.4 – Armenia: Actual Spending on Social Sectors within Consolidated Budget*, 2012-2017 (percent of total consolidated budget expenditures) 2012 2013 2014 2015 2016 2017 Education 12.9 11.5 11.9 11.2 11.0 10.8 Health 6.2 5.5 6.1 6.0 6.0 5.4 Culture, information, sport, religion 2.8 2.2 2.3 2.7 2.3 2.3 Pensions** 19.8 17.6 19.4 20.0 20.0 19.7 Pensions, as percent of GDP 4.8 4.5 5.1 5.7 5.9 5.4 Other social programs 8.6 8.1 7.9 6.8 7.0 7.1 Total actual spending on social sectors 50.3 44.9 47.6 46.7 46.3 45.3 within consolidated budget Source: RA SC Notes: * Includes expenditure on social sectors from both state and local community budgets. ** Includes health, disability, age and survivors’ pensions 2.2 Economic Growth/ Recession and Poverty The economic growth over the last years (2012-2017) has had certain positive impact on the poverty level in the country. Poverty-to-GDP elasticity has been used to demonstrate the macro/ micro interrelation between macroeconomic changes and poverty level dynamics. Starting from 2015, the SC calculates the GDP in accordance with the System of National Accounts (SNA 2008) international standard, also revising the 2012-2014 GDP figures accordingly. In this report, data on the 2013-2017 GDP and economic growth are calculated in accordance with the SNA 2008. The economic growth over 2013-2017 created prerequisites for improved living conditions and reduced poverty rate. Compared to 2012, GDP increased by 18.96% and poverty decreased by 20.7% in 2017 thus producing a negative poverty-to-GDP elasticity coefficient over the 2013-2017 period. In 2017, for each percentage point of economic growth relative to 2012 the total poverty rate decreased by 1.09 percentage points (Table 2.5). The elasticity coefficient over the period 2013-2017 was higher in other urban communities. Table 2.5 – Armenia: Poverty-to-GDP* Elasticity Estimates, 2013-2017 (2012 = 100) (percentage point) Total poverty reduction-to-GDP elasticity -1.09 a) Urban poverty reduction-to-GDP elasticity -1.22 1) Yerevan poverty reduction-to-GDP elasticity -0.66 2) Other urban poverty reduction-to-GDP elasticity -1.61 b) Rural poverty reduction-to-GDP elasticity -0.87 c) Rural poverty reduction-to-agriculture value added elasticity -1.02 Source: RA SC, ILCS * Calculated in accordance with the System of National Accounts (SNA 2008) international standard 35 Chapter 3. Poverty Profile in Armenia in 2008-2017 3.1. Introduction In 2017 unprecedented economic growth of 7.5% was recorded in Armenia as compared to the previous year. This is the first time during the reporting period (2008-2017) that such an increase has being registered. At the same time the consumer price index in 2017 showed increase of 1.0% compared to the previous year. Compared to 2016, the poverty rate decreased by 3.7 percentage points and amounted to 25.7%. As a result, for the first time in 2017 the poverty rate in Armenia has decreased to the level that it is lower than 2008 rate (27.6%) by 1.9 percentage points. This report presents poverty profile in Armenia in 2017 comparing it with pre-crisis data of 2008. The adjusted methodology designed for the construction of the consumption aggregate and the poverty lines (by more detailed elements and a three-tier method of poverty assessment) was used for 2008-2017 and was jointly developed by the NSS RA and the World Bank in 2009. 3.1.1. Main Concepts A key indicator used to estimate the welfare and living standards of the population is the poverty rate in the country. Poverty is manifested in different ways and touches upon various aspects of life: consumption, food safety, health, education, rights, including the right to vote, security, the right to dignity and decent work. Similar to previous reports, changes of population welfare dynamics are described both in terms of material and non-material poverty. Indicators of non-material poverty are poor health, low levels of education or illiteracy, social disregard or banishment, vulnerability, inability to exercise rights and freedom of speech, i.e. practical impossibility to signal about one's problems. The main way to overcome non-material poverty is to improve access to education, health care and social services through better targeting of free services and higher ability to benefit from paid ones. In Sections 3.1-3.8 of this Chapter poverty is evaluated based on material (monetary) indicators. The main (official) poverty dimension in Armenia is absolute poverty based on consumption which is derived from 2009 methodology. In that context, according to the World Bank definition, “absolute poverty is the inability by the households to ensure an acceptable minimum of certain living conditions.” This Chapter presents relative poverty, international poverty rate in the countries in the region, multidimensional poverty index and social exclusions (see Sections 3.7-3.10). Consumption aggregate is used as a welfare measure for assessing poverty in Armenia. International practice shows that consumption aggregate provides more accurate information and it is less sensitive to short-term fluctuations than income, particularly in lower and middle-income countries. Information on income is less reliable, because respondents often tend to hide or underreport income; and some types of incomes are significantly dependent on seasonality. The Consumption aggregate includes the following components: (a) cost of consumed food and non-food products, including of own production, aid from charitable organizations and other sources, and (b) estimated cost of durable goods. 36 Concept of absolute poverty is used for assessing monetary poverty in Armenia. Based on the poverty status the population in Armenia is classified into the poor and the non-poor households. The poor, in turn, comprise the moderate (very) poor and, among them, the extremely poor. Poverty in Armenia is assessed since 1996. Starting from 2009, the country has been using the World Bank’s third revised methodology (poverty indicators estimated according to three different methodologies are not comparable and are presented in Table A3.6 of Annex 2). The poor are defined as those, whose consumption per adult equivalent is below the upper national poverty line; the moderate (very) poor1 are defined as those, whose consumption per adult equivalent is below the lower national poverty line, whereas the extreme poor or the undernourished are defined as those, whose consumption per adult equivalent is below the food (extreme) poverty line. In 2017, the poverty rate was 25.7% with 3.7 percentage point reduction from its 2016 level. This means that every fourth person in the country lived below the upper national poverty line of AMD 41 612/month. The graph below shows the three poverty lines using the 2009 Methodology in 2017 prices. Graph 3.1. Armenia. Poverty Rate and Poverty Lines in 2017 Upper poverty line Non- poor AMD 41 612/ month Poor 15.1% 74.3% Lower poverty line AMD 34 253/ month Moderate 9.2% poor Poor 25.7 % Food poverty line AMD 24 269/month Extremely 1.4% poor Although the poverty rate is one of the indicators most often used for assessing poverty, it does not take into account the intensity of poverty, meaning how far below the poverty line poor households live which is often referred to as the poverty gap. The poverty gap is calculated based on poor population and indicates poverty shortfall, i.e. it shows the extent to which the average income2 (or consumption) of the poor is below the poverty line. 1 From now on, the term "very poor" has been replaced by "moderate poor" 2 In case of Armenia -consumption 37 The poverty gap (4.4% in 2017) assessment also indicates that, if the country were able to mobilize resources for each individual in the country (both poor and non-poor) equivalent to 4.4% of the poverty line and these resources were allocated only to poor households, poverty theoretically would be eliminated, assuming that the assistance aimed for the poor would fully reach the poor. The severity of poverty reflects inequality of consumption among the poor. It reflects the fact that in terms of consumption some poor people are far from the poverty line, while others are much closer to it. In 2017, the severity of poverty was 1.2%. In 2017, the poverty gap and poverty severity were lower than in 2008 (4.4% in 2017 versus 5.1% in 2008 and 1.2% versus 1.4%, respectively). 3.2. Poverty Indicators and Trends Poverty Trends. In 2017, the poverty rate in Armenia was 25.7% as compared to 27.6% recorded in 2008. The share of moderate poor was 10.6% as compared to 12.6% in 2008. The share of the extremely poor was 1.4% as compared to 1.6% recorded in 2008 (Table 3.1). In 2017 the total poverty was lower than pre-crisis level of 2008 by 1.9 percentage points, the number of moderate poor people decreased by 2.0 percentage points, and the rate of extreme poverty decreased by 0.2 percentage points. As shown in Graph 3.1, in the total number of 25.7% poor population 1.4% are extremely poor, 9.2% are moderate poor (excluding the extremely poor) and remaining 15.1% are just poor. The total number of the poor in 2017 was 766 thousand (per resident population3), including 316 thousand of moderate poor (including the extremely poor), and 42 thousand of the latter were extremely poor. As compared to the previous year, the total number of both poor and extremely poor has decreased, while the number of moderate poor has increased at the expense of the extremely poor that moved to this group. In 2017, the difference between the poverty rates in urban (25.0%) and rural (26.8%) communities was not big, it was 1.8 percentage points. Nonetheless, that difference is large between Yerevan (22.4%) and other towns of the country (27.9%) and it made 5.5. percentage points. The poverty gap in 2017 was estimated at 4.4% versus 5.1% in 2008 (decrease of 0.7 percentage points), whereas the poverty severity was estimated at the level of 1.2% versus 1.4% in 2008 (decrease of 0.2 percentage points). 3 According to the 2017 average annual indicator of permanent resident population. 38 Table 3.1. Armenia. Basic Poverty Indicators, 2008, 2016 and 2017 (percent) 2008 2016 2017 Extre Moder Poor Extre Moder Poor Extre Moder Poor % in Poverty Poverty mely ate mely ate mely ate poor gap severity poor (very) poor (very) poor (very) populati poor poor poor on Urban 1.9 13.0 27.6 2.0 9.6 28.8 1.2 9.8 25.0 59.7 4.1 1.1 communities Yerevan 1.1 8.1 20.1 1.9 7.8 24.9 1.0 8.3 22.4 27.7 3.6 0.9 Other towns 2.8 18.2 35.8 2.1 11.6 33.2 1.3 11.5 27.9 32.0 4.7 1.3 Rural 1.2 11.9 27.5 1.4 10.1 30.4 1.9 11.8 26.8 40.3 4.8 1.4 communities Total 1.6 12.6 27.6 1.8 9.8 29.4 1.4 10.6 25.7 100 4.4 1.2 Source: ILCS 2008, 2016 and 2017 Graph 3.2. Armenia. Poverty Indicators by Urban/Rural Communities 2008 and 2017 (percent) Source: ILCS 2008 and 2017 39 Table 3.2. Armenia. Dynamics of Poverty Rate Indicators in 2004-2017 (according to 2009 methodology) (percent) Years Non-poor Poor Population Of which the rate of moderate (very) poor people including the rate of the extremely poor 2004 46.5 53.5 32.6 4.4 2005 59.9 40.1 19.6 3.3 2006 69.8 30.2 14.2 2.3 2007 73.6 26.4 14.5 2.0 2008 72.4 27.6 12.6 1.6 2009 65.9 34.1 20.1 3.6 2010 64.2 35.8 21.3 3.0 2011 65.0 35.0 19.9 3.7 2012 67.6 32.4 13.5 2.8 2013 68.0 32.0 13.3 2.7 2014 70.0 30.0 10.9 2.3 2015 70.2 29.8 10.4 2.0 2016 70.6 29.4 9.8 1.8 2017 74.3 25.7 10.6 1.4 Source: ILCS 2004 - 2017 Over the period of 2004-2017, poverty rate declined by 52% (or 2.1 times) from around 53.5% to 25.7%. Extreme poverty rate declined by 68% (or 3.1 times) compared to 4.4% in 2004 and 1.4% in 2017. Poverty lines used in the calculation of poverty indicators are provided in Table 3.3. Poverty line in 2017 was calculated using the factual (empirically determined) minimum food basket and the estimated share of non-food products for 2009 (see the Methodological Clarifications). Poverty lines for 2017 have been adjusted to take account of deflation in 2017 to enable comparison with the consumption aggregate computed in current prices4. Table 3.3. Armenia. Dynamics of Nominal Poverty Lines and Their Changes in 2004- 2017 (per adult equivalent, per month) (using 2009 Methodology) (AMD) Poverty Lines Food or extreme poverty line Lower total poverty line Upper total poverty line 2004 12 651 20 704 25 386 2005 13 186 19 197 24 113 2006 13 810 19 972 25 011 2007 14 147 20 450 25 605 2008 17 644 24 388 29 903 2009 17 483 25 217 30 920 2010 19 126 27 410 33 517 2011 21 306 29 856 36 158 1 Details in the section “Methodological Clarifications”. 40 Poverty Lines Food or extreme poverty line Lower total poverty line Upper total poverty line 2012 21 732 30 547 37 044 2013 22 993 32 318 39 193 2014 23 384 33 101 40 264 2015 24 109 34 234 41 698 2016 23 313 33 418 40 867 2017 24 269 34 253 41 612 Source: ILCS 2004 - 2017 In 2017, the total – both upper and lower – and the extreme poverty lines reflected per adult equivalent per month were estimated to be AMD 41 612 (or USD 86.2), AMD 34 253 (or USD 71.0) and AMD 24 269(or USD 50.3.), respectively. In this report the poverty level will be presented as upper poverty line indicator. The extreme poverty line will be defined as the share of population with a consumption below food or extreme poverty line. Factors Contributing to Poverty Decrease. Over 2008-2017, the key factor contributing to decrease in the poverty rate was the economic growth of 2017. According to the International Standard “System of National Accounts 2008” (SNA 2008), the Armenian economy has grown by 3.3% in 2013 compared to 2012, by 3.6% in 2014 compared to 2013, by 3.2% in 2015 compared to 2014, by 0.2% in 2016 compared to the previous year, and by 7.5% compared to 2016. As compared to pre-financial crisis data of 2008, the economic growth in 2017 is the largest. Results from the ILCS 2017 show that the average monthly real consumption of the entire population increased by 10.2% compared to 2008, with such increase having been observed in all quintiles of the consumption distribution. Poverty by urban/rural communities. Over 2008-2017, the poverty rate in urban and rural communities increased by 2.6 and 0.7 percentage points, respectively (Table 3.1). Poverty rate is the lowest in the capital city Yerevan (22.4%), which was 1.2 times lower than in other urban communities outside Yerevan. In 2017 as compared to 2008, the poverty in Yerevan increased by 2.3 percentage points, while in other urban communities, the rate remaining the highest, it nevertheless dropped by 7.9 percentage points compared to 2008. In terms of urban/rural differences between the living standards of rural/urban households, majority of the poor (59.7%) are urban residents. During the period of 2008-2017 extreme poverty in urban communities decreased by 0.7 and in rural communities it increased by 0.7 percentage points (Table 3.1). Extreme poverty is the lowest in Yerevan (1.0%) and the highest - in rural communities (1.9%). In 2017 extreme poverty in Yerevan dropped by (1.0%) percentage points compared to 2008 (1.1%). In other urban areas outside Yerevan the rate dropped twice versus the level of 2008, however it increased by 0.7 percentage points in rural areas. Majority of the extremely poor population (59.7%) are urban residents. Poverty in the RA Provinces (Marzes) and in Yerevan City. Administrative division of Armenia consists of 10 provinces and the City of Yerevan. Table 3.4 presents the basic poverty indicators for 2017 and the dynamics of poverty indicators over 2008-2017, broken down by provinces and Yerevan City. The Integrated Living Condition Surveys conducted by the NSS RA in 2008-2017 is designed such that it is statistically representativeness of provinces and Yerevan. Nonetheless, poverty rates should take into account standard errors and confidence interval. In 2017, poverty rates differed by provinces and Yerevan. The poverty indicators in Shirak, Kotayk, Lori, Tavush and Armavir provinces are higher than the country average. The highest poverty rate in the country has been recorded in Shirak province, where 44% of the population is below the poverty line. 41 In 2017 poverty rate indicators exceeded the rates of 2008 in Yerevan, Armavir, Shirak and Tavush. For the same period the poverty rate indicators decreased both countrywide and in Aragatsotn, Ararat, Gegharkunik, Lori, Kotayk, Syunik and Vayots Dzor as compared to 2008 data. Over the same period, extreme poverty has also decreased both countrywide, in Yerevan and Aragatsotn, Lori, Kotayk, Syunik, Vayotz Dzor and Tavush provinces. Nevertheless, extreme poverty has increased in the provinces of Armavir, Gegharkunik and Shirak. In Ararat the level of extreme poverty remained the same in 2017 and 2008 Table 3.4. Armenia. Basic Poverty Indicators, by Provinces and Yerevan, 2008 and 2017 {95% Confidence Interval in Shaped Brackets} (percent) 2008 2017 Extremely Poor Extremely Poor % among the % in the total poor poor poor population 1.1 20.1 1 22.4 27.7 31.8 Yerevan {0.3;1.9} {17.3;22.9} {0.4 ; 1.7} {20.7 ; 24.0} 0.5 20.3 0.0 17.6 2.7 3.9 Aragatsotn {-0.3;1.3} {13.9;26.7} {0.0 ; 0.0} {13.5 ; 21.7} 1.6 31.3 1.6 21.7 7.6 9.0 Ararat {0.2;3.0} {25.5;37.1} {-0.4 ; 3.7} {17.1 ; 26.3} 0.7 24.5 0.8 26.2 10.0 9.9 Armavir {0.1;1.3} {19.7;29.3} {-0.1; 1.8} {21.8; 30.6} 0.4 32 1.3 20.5 5.5 6.9 Gegharkunik {0.2;0.6} {25.8;38.2} {-0.2 ; 2.9} {13.5; 27.5} 2.8 34.2 2.1 29.7 10.4 8.9 Lori {1.2;4.4} {29.2;39.2} {0.3; 3.8} {25.5; 33.9} 2.1 39.5 1.5 31.1 12.6 10.4 Kotayk {0.7;3.5} {34.7;44.3} {-0.2; 3.1} {27.9; 34.4} 4.6 42.4 4.7 44.3 14.3 8.3 Shirak {2.0;7.2} {37.2;47.6} {1.7; 7.8} {40.8; 47.7} 1.3 20.3 0.0 18.5 3.3 4.5 Syunik {0.5;2.1} {14.3;26.3} {0.0; 0.0} {12.5; 24.5} 1.9 21.1 0.0 16.9 1.2 2.0 Vayots Dzor {0.1;3.7} {14.9;27.3} {0.0; 0.0} {12.6; 21.2} 1.7 23.2 1.1 27.8 4.7 4.4 Tavush {0.3;3.1} {18.0;28.4} {-0.6; 2.9} {22.8; 32.8} 1.6 27.6 1.4 25.7 100 100 Total {1.2;2.0} {26.0;29.2} {1.0; 1.9} {24.4; 27.0} Source: ILCS 2008 and 2017 Poverty rate sensitivity to changes in poverty line. In comparison to the upper national poverty rate, the extreme poverty rate is more sensitive to changes in poverty line, which indicates a higher concentration of population around the extreme poverty line compared to upper national poverty line. Table 3.5 presents the changes in poverty rate indicators in relation to the changes in the poverty line. 5% increase in extreme poverty line would result in an increase of extreme poverty by 1.5 times and an 42 increase of total poverty by around 11.3%. The changes in poverty rate are statistically significant (at 1% significance level) when poverty line decreases or increases by 5%, 10% and 20%. Table 3.5. Armenia. Changes in Poverty Rate in Relation to Changes in Poverty Line, 2017 (percent) Changes in poverty line Extremely poor Poor No change, 0% 1.4 25.7 +5% 2.1 29.1 -5% 1.0 20.0 +10% 2.8 33.2 -10% 0.6 16.2 +20% 4.4 41.4 -20% 0.3 9.4 Source: ILCS 2017 Poverty by consumption and income indicators. Table 3.6 illustrates comparison of consumption and income poverty indicators in Armenia over 2008-2017. Income-based poverty estimates were lower than those based on consumption as welfare measure. At the same time, income-based extreme poverty was 4.5 times higher than consumption-based extreme poverty. The difference is mostly explained by higher inequality in income than consumption distribution. (Table 3.17). In 2017, average monthly income per adult equivalent in 2008 prices exceeded consumption by 28.6%, while in 2008 the average monthly income was below consumption by 1.0%. Table 3.6. Armenia. Poverty by Consumption and Income Indicators, 2008-2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Monthly consumption 42 870.2 40 250.2 39 459.3 40 296.9 45 583.0 44 751.4 47 622.0 47 620.0 49 754.4 47 257.6 per adult equivalent (AMD, in average national prices of 2008) Monthly income 42 484.4 43 824.7 44 887.4 45 326.1 49 285.9 48 418.2 54 476.9 56 692.5 61 484.0 60 761.9 per adult equivalent (AMD, in average national prices of 2008) Income/consumption 0.99 1.09 1.14 1.12 1.08 1.08 1.15 1.19 1.24 1.29 ratio Consumption-based poor (percent) Extremely poor 1.6 3.6 3.0 3.7 2.8 2.7 2.3 2.0 1.8 1.4 Poor 27.6 34.1 35.8 35.0 32.4 32.0 30.0 29.8 29.4 25.7 Income-based poor (percent) Extremely poor 12.1 12.2 12.1 13.2 11.5 11.5 8.8 6.5 6.4 6.3 Poor 38.1 38.2 38.4 37.1 32.8 32.7 26.9 24.4 24.2 20.9 Source: ILCS 2008 and 2017 Note. Income is defined as total disposable income and includes monetary income, monetary value of consumption in kind, and consumed savings. 43 Cross comparison of indicators on consumption and income poverty in 2017 showed that more than half of individuals with household income below the poverty line were above the line based on consumption indicators (55.7%). Only 8.1% of households classified as extremely poor and 44.3% classified as poor based on income indicator were assessed as extremely poor and poor based on consumption indicator. When considering the poor based on consumption indicator, 37.9% of them were scored also as income poor. 42.3% of consumption-based extremely poor were also considered income poor. Graph 3.3. Armenia. Poverty Rate by Consumption and Income Indicators, 2008 and 2017 (percent) Source: ILCS 2008 and 2017 What would be the Cost to Overcome Poverty in 2017? To overcome poverty, Armenia would need AMD 65.2 billion, or an amount equal to 1.2% of GDP, in addition to the resources already allocated for social assistance, assuming that such assistance would be efficiently targeted to the poor only (Table 3.7). Elimination of extreme poverty would require around AMD 1.4 billion, or 0.02% of GDP, in addition to social assistance already channeled to the extremely poor and ensuring efficient targeting. International experience shows that perfect targeting of social assistance is highly unlikely; therefore, the actual resources needed to overcome poverty would be significantly larger. Deficit, additional consumption for the poor in relation to poverty line is 17.1% (Table 3.7) Table 3.7. Armenia. Monetary Cost of Overcoming Poverty, 2017 2017 Extremely poor Poor Average consumption by the poor (AMD, per adult equivalent, per month) 21 407 34 517 Poverty line (AMD, per adult equivalent, per month 24 268 41 612 Additional consumption for the poor (AMD, monthly) 2 861 7 095 Deficit, additional consumption for the poor in relation to poverty line 11.8 17.1 (percent) GDP (AMD billion) 5668.9 44 2017 Extremely poor Poor Required budget (AMD billion) 1.4* 65.2* Required budget as percent to GDP 0.02 1.2 Source. RA NSS and RA ILCS 2017 Note: Calculated by multiplying the average annual number of resident population by the poverty rate and the value of additional annual consumption required for the poor (Table 3.7 provides the additional monthly consumption required for the poor). 3.3. Poverty and Economic Growth/ Recession Linkages Changes in the poverty rate are driven by changes in average consumption for the total population, and by shifts in the distribution when some households in the country experience higher consumption growth than others (see the methodology developed by Datt and Ravallion (1992)). The first component - consumption growth effect - shows the impact of the change in consumption on poverty provided that all households in the country grow at the same pace, while the second component – redistribution effect - shows the poverty impact of redistribution provided that consumption remains unchanged. Results of the analysis show, that in Armenia, 1.85 percentage points decrease of total poverty over 2008-2017 was due to the impact of both the consumption and redistribution effects. In particular, the growth of the first component, i.e. the average consumption resulted in 31.10 percentage points decline of poverty, whereas the growth of inequality underlying the second component, i.e. the redistribution, resulted in 29.25 percentage points increase of poverty. In other words, if consumption of all Armenian households were to grow at the same rate, poverty in 2017 would be lower than in 2008 by 31.10 percentage points. In contrast, slower growth in consumption of poor households due to unequal growth rate over time resulted in only 1.85 percentage point decline of poverty. Hence, these two components jointly caused decrease in the poverty rate. (Table A3.7). Table 3.8. Armenia. Annual Rates of Consumption Growth by Urban/Rural Communities, 2008 -2017 (percent) Annual growth rate Total Yerevan Other urban Rural areas areas Average growth rate (regular growth rate) 1.1 1.7 1.2 0.5 Average percentage growth rate 0.5 0.1 0.9 0.0 Average growth rate in the bottom quintile 0.3 0.6 1.0 0.2 Average growth rate for P(0), extreme poverty line 0.5 0.1 1.1 -0.8 Average growth rate for P(0), total poverty line 0.4 0.0 1.1 -0.1 Source: ILCS 2008 – 2017 Note: Growth rates refer to consumption increase; P (0) stands for poverty rate (Foster, Green and Thorbecke, 1984). 45 Economic growth in Armenia can be estimated by different components of the average consumption growth distribution (Ravallion and Cheng, 2002). Table 3.8 shows that annual increase of overall population consumption exceeds the consumption of the poor (respectively, 1.1% and 0.4%). As a positive factor to be recorded is that the consumption of extremely poor has increased more rapidly than that of poor (0.5% and 0.4%, respectively). In 2017 as compared to 2008, the poverty rate decreased by 6.9%, and the extreme poverty rate - by 12.5%. When considering the urban/rural distribution (Table 3.8), one can see that while the annual consumption of the poor over 2008-2017 increased by 0.4%, in Yerevan it has not increased, it remained the same and in urban communities other than Yerevan it increased at a higher rates than the total consumption of the poor (respectively, 1.1% versus 0.4% per annum). The consumption of the poor in rural communities in 2008-2017 has decreased by 0.1%. As illustrated by the growth rate curves presented below, at the national level, nominal consumption growth was observed in all deciles in 2008-2017, but for the poorest population in the first deciles it was insignificant (0.9% for nine years). The increase is not divergent in the population group from the second to the ninth deciles (2.3-5.0% for nine years). In the same period, two-digit growth was recorded only in the tenth (the wealthiest population group) decile (35.7%). The worst affected by the crisis was the poorest first decile group in rural communities (2.5% decline). At the same time, the richest 10th decile was the group in Yerevan that benefited the most from the crisis (40% growth). Both in cities outside Yerevan and in villages, the growth in the richest 10th decile was, respectively, 1.5 and 1.3 times lower than in Yerevan. (Graphs 3.4-3.7). 46 Graph 3.4. Armenia. Consumption Growth Curve, 2008-2017 Source: ILCS 2008 – 2017 Graph 3.5. Armenia. Consumption Growth Curve in Yerevan, 2008-2017 Source: ILCS 2008 - 2017 47 Graph 3.6. Armenia. Consumption Growth Curve in Other Urban Communities, 2008-2017 Source: ILCS 2008 – 2017 Graph 3.7. Armenia. Consumption Growth Curve in Rural Communties, 2008-2017 Source: ILCS 2008 - 20167 48 3.4. Structural Profile and Dynamics of Poverty over 2008-2017 The structural profile of poverty during 2008-2017 has the following picture: (a) in 2017the poverty rate was not very different for male/female, like in 2008 (the poverty rate difference was noted with reference to gender of the household head, Table 3.13) (b) Poverty rate in children aged 15-17 years was higher than in other age groups. Poverty rate in the age group of 45-49 and 60-64 years was the lowest in 2017 (Table 3.9). Table 3.9. Armenia. Poverty Rate, by Gender and Age Groups, 2008 and 2017 (percent) 2008 2017 Extremely Poor Extremely Poor % in the % in the total Gender and age groups poor poor poor population population Gender Female 1.7 27.3 1.5 26.3 55.7 54.5 Male 1.6 27.8 1.3 25.0 44.3 45.5 Age groups Children 0-5 1.9 32.0 2.3 31.7 9.2 7.5 6-9 years old 1.8 30.3 2.0 30.4 6.5 5.5 10-14 1.5 29.7 1.8 28.2 6.8 6.2 15-17 2.3 32.4 2.7 33.9 4.6 3.5 18-19 0.7 26.1 2.6 30.6 2.1 1.8 20-24 1.3 26.0 1.1 24.0 6.2 6.7 25-29 2.1 27.0 1.6 24.2 7.1 7.5 30-34 1.1 25.7 1.5 26.8 7.5 7.2 35-39 1.9 27.6 1.9 28.9 7.5 6.6 40-44 1.9 29.3 1.1 24.5 5.7 6.0 45-49 1.9 25.7 1.1 22.1 4.8 5.6 50-54 1.2 22.2 1.2 23.5 5.8 6.4 55-59 0.7 21.7 1.1 23.0 6.8 7.7 60-64 1.3 24.8 1.4 22.5 5.4 6.2 65+ 2.0 29.5 0.7 22.8 14.0 15.6 Total 1.6 27.6 1.4 25.7 100.0 100.0 Source: ILCS 2008 and 2017 (c) For larger/extended households and households with children the probability of being poor is higher. The relative risk of poverty grows proportionally to the household size (Table 3.10). An important factor behind poverty in extended households is the dependency ratio. Larger households have more children and, therefore, a lower share of income earners as compared to smaller households, which causes their consumption levels to be lower. 49 Table 3.10. Armenia. Poverty Rate by Household Size, 2008 and 2017 (percent) Household size 2008 2017 Extremely Poor Extremely poor Poor % in the % in the total poor poor population populatio n Number of household members 1 0.9 17.2 0.3 7.8 1.5 4.9 2 0.8 19.0 0.1 14.2 6.9 12.6 3 1.0 18.8 0.8 17.5 9.9 14.5 4 0.9 23.6 1.1 23.1 19.2 21.4 5 1.9 30.3 1.6 30.3 22.7 19.3 6 2.8 34.7 2.1 34.2 19.9 14.9 7 and more 2.4 38.2 3.4 41.4 19.9 12.4 Total 1.6 27.6 1.4 25.7 100 100 Source: ILCS 2008 and 2017 (d) In Armenia households with three or more children under 6 years have 1.9 times higher poverty risk (49.6%) than the national average (25.7%), as well as higher than the risk faced by the households with fewer children; for example, households with 1 or 2 children – 1.6 and 1.5 times, respectively (Table 3.11). Nevertheless, these results should be treated with certain caution since they largely depend on assumptions regarding equivalence scales and economies of scale (Lanjouw and Ravallion, 1995). Table 3.11. Armenia. Poverty Rate, by Number of Children (under 6 years) and Elderly Members (above 60), 2008 and 2017 (percent) Number of children 2008 2017 and elderly members Extremely Poor Extremely Poor % in the poor % in the total poor poor population population Number of children 0 children 1.5 25.4 1.1 22.9 61.9 69.4 1 child 1.9 31.3 2.0 30.6 24.9 21.0 2 children 1.6 34.4 1.2 33.1 10.7 8.3 3 and more children 5.3 34.8 10.3 49.6 2.5 1.3 Number of elderly 0 elderly member 1.3 24.7 1.5 22.7 43.0 48.8 1 elderly 1.6 30.0 1.4 29.2 37.0 32.6 2 and more elderly 3.0 33.9 1.2 27.6 20.0 18.6 Total 1.6 27.6 1.4 25.7 100 100 Source: ILCS 2008 and 2017 (e) What is the impact of adult (18 years and above), children (under 6 years old) and elderly members (over 60 years of age) in a household on poverty rate? In 2017 households having only adults (1, 2, 3 or 4 members) in their composition have a large share (52.9%) in the households of the country, and the poverty risk of the households composed of only 1 and 2 members is lower than the national average. Poverty rate of the households consisting only of elderly 50 members is the lowest compared to the national average. (14.2% vs. 25.7%). Poverty rate of households consisting of two adults and two children below 6 years is 1.6 times higher than the national average (40.7% and 25.7%, respectively) (Table 3.12). Table 3.12. Armenia. Poverty Rate by Household Composition, 2008 and 2017 (percent) 2008 2017 Extremely Poor Extremely Poor % in the % in the total Household composition* poor poor poor population population 1 adult, no children 1.5 18.7 1.2 13.9 1.7 3.1 2 adults, no children 0.9 20.5 0.5 14.1 6.4 11.6 2 adults, 2 children - 25.4 2.2 40.7 2.3 1.5 Elderly members with no 1.1 23.4 0.1 14.2 4.5 8.2 children, no adults 3 adult 1.6 25.9 1.5 29.1 24.9 21.9 4 adult 1.0 28.3 1.6 27.0 17.2 16.3 Other 2.4 31.9 2.0 29.6 43.0 37.4 Total 1.6 27.6 1.4 25.7 100 100 * adult – 18 years and above, a child – under 6 years, elderly - above 60. Source: ILCS 2008 and 2017 (f) In 2017 the poverty rate of female-headed households was higher than poverty rate of male- headed households (29.2.% versus 24.4%). Female-headed households in 2017 comprised 32% and 28% of the poor population and the total population, respectively. Female-headed households with children up to 6 years have higher risk of poverty (1.6 times higher) compared to the national average (Table 3.13). The risk of poverty for such families in urban communities was higher than in rural communities (42.1% and 37.2%, respectively). Table 3.13. Armenia. Poverty Rate, by Gender of Household Head, 2008 and 2017 (percent) Gender of household head 2008 2017 Extremel Poor Extremely Poor % in the poor % in the total y poor poor population population Male-headed 1.5 26.6 1.3 24.4 68.5 72.3 Female-headed, including 2.0 30.4 1.7 29.2 31.5 27.7 Female-headed, no children 1.6 28.5 1.3 25.7 21.0 21.0 under 6 years Female-headed, with children 3.0 35.5 3.1 40.0 10.5 6.7 under 6 years of age Total 1.6 27.6 1.4 25.7 100 100 Source: ILCS 2008 and 2017 51 Graph 3.8. Armenia. Poverty Rate, by Gender of Household Head, 2008 and 2017 (percent) Source: ILCS 2008 and 2017 (g) People with higher education are less likely to be poor (Table 3.14). Poverty rate is the lowest among persons with tertiary education – around 1.8 times lower than the national average for population over 16 years of age, and 2.4 and 2.5 times lower than among those with elementary and primary or incomplete secondary education. Extreme poverty rate was the lowest among those with tertiary education compared with all other groups of educational levels, both in 2008 and 2017. In 2017, the extreme poverty rate among those with higher education was very close to 2008 level (0.5% and 0.4%, respectively). People with general secondary education comprised the largest group among the poor (53%). Among the population over 16 years of age, this is the group that faces difficulties in finding jobs. Table 3.14. Armenia. Poverty Rate, by Educational Level, 2008 and 2017 (for population aged 16 years and above) (percent) 2008թ. 2017թ. Education level Extreme poor Poor Extreme poor Poor % in the poor % in the (reference reference population) population Elementary and 4.2 36.1 2.0 31.8 1.9 1.5 primary Incomplete secondary 3.2 40.1 3.9 33.5 11.3 8.3 General secondary 1.7 30.2 1.4 29.3 53.0 44.3 Specialized secondary 1.0 21.9 0.8 23.0 20.9 22.2 Tertiary 0.4 14.7 0.5 13.3 12.9 23.7 Total 1.6 26.6 1.3 24.5 100 100 Source: ILCS 2008 and 2017 52 Graph 3.9. Armenia. Poverty Rate, by Educational Level, 2008 and 2017 (for population aged 16 years and above) (percent) Source: ILCS 2008 and 2017 (h) Labor market participation is an important factor which impacts the poverty rate. Especially in the absence of work, the likelihood of being poor or extremely poor increases. This is evidenced by the fact that in 2017 the poverty rate among households with no employed members was 28.0%, which was 3.1 percentage points higher than the national average for individual in the age group between 15 and 75 years (Table 3.15). Over the same period, extreme poverty rate among households with no employed members was 2.6%, which was 1.9 times higher than the national average. Table 3.15. Armenia. Poverty Rate, by Number of Employed Household Members, 2008 and 2017 (15 -75 years old population) (percent) 2008 2017 Number of employed Extremely Poor Extremely Poor % in the % in the household members poor poor poor population 15-75 years 15-75 years old old No employed members 5.7 46.6 2.6 28.0 13.0 11.6 1 employed member 2.8 32.5 2.4 26.1 27.8 26.5 2 employed members 0.7 26.0 0.8 23.5 31.5 33.3 3 and more employed 1.1 24.9 0.6 24.0 27.7 28.6 members Total 1.9 29.5 1.4 24.9 100 100 Source: ILCS 2008 and 2017 (i) Over 2008-2017, the poverty rate decreased both among active labor market participants, that is the employed, and among economically inactive population (those who don’t work and don’t seek job) (Table 3.16). Labor generates income, hence reduces poverty rate. Survey data show that majority of the poor did not work, while a significant part of the non-poor has been involved in some types of economic 53 activity. Over 2008-2017, the poverty rate decreased both among the economically active population of the labor market and among economically not active population. Over 2008-2017, the poverty rate among active labor market participants remained nearly at the same level in the category of hired workers – 20.7%-20.5%, whereas the rate within the category of economically not active population – among pensioners - a positive trend was observed. The poverty has decreased by 22%. However, it has increased among students by 21%. In the structure of economically active population (labor market participants), the risk of poverty is higher among the unemployed (34.7%) (Table 3.16). Over 2008-2017, the poverty rate among pensioners declined by 22%, as mentioned above. However, pensioners living in Yerevan have lower poverty risk as compared to those living in rural communities (1.5 times) and in other urban communities (1.2 times). The highest rate of extreme poverty was recorded among pensioners living in rural communities (7.0%). Table 3.16. Armenia. Labor Force Participation and Poverty Rate, 2008 and 2017 (15 -75 years old population) (percent) 2008 2017 Extremely Poor Extremely Poor % in the % in the Labor force participation poor poor poor population 15-75 years 15-75 years old old Total population conomically active 1.0 23.9 1.0 23.2 63.3 67.7 Employed 0.8 22.2 0.8 21.4 50.3 58.5 Hired workers 1.0 20.7 0.6 20.5 28.1 34.0 Self-employed 0.6 23.3 1.0 22.1 16.4 18.5 Other employed 0.4 27.2 1.1 24.5 5.8 6.0 Unemployed 2.1 32.6 2.6 34.7 13.0 9.2 Economically not active 2.4 30.8 2.0 28.2 36.7 32.3 Pensioners 2.8 34.5 2.3 26.8 10.1 9.3 Students 1.5 22.4 1.4 27.1 6.9 6.4 Other economically not active 2.7 33.1 2.2 29.4 19.7 16.6 Yerevan City Economically active 0.6 17.6 0.7 20.2 58.8 63.4 Employed 0.5 15 0.5 18.1 42.4 51.0 Hired workers 0.6 16 0.4 17.9 36.1 44.1 Self-employed - 7.1 1.1 19.9 6.1 6.7 Other employed - 5.4 0.0 15.7 .2 .2 Unemployed 1.1 25.7 1.7 28.8 16.4 12.4 Economically not active 1.7 22.3 1.3 24.6 41.2 36.6 Pensioners 2.8 27.4 1.1 23.0 13.2 12.6 Students 0.7 14.6 1.0 22.3 7.2 7.0 Other economically not active 1.6 23.2 1.6 26.7 20.8 17.0 Other urban communities Economically active 1.8 31.2 1.1 25.2 55.7 59.8 Employed 1.3 28.1 0.6 22.0 38.7 48.0 Hired workers 1.3 27.1 0.6 23.0 30.8 36.6 Self-employed 1.5 30.5 0.8 19.0 7.1 10.2 Other employed - 38.8 0.0 18.4 .8 1.2 54 2008 2017 Extremely Poor Extremely Poor % in the % in the Labor force participation poor poor poor population 15-75 years 15-75 years old old Unemployed 3.6 41.5 2.9 39.4 17.0 11.8 Economically not active 3.6 38.6 1.6 30.0 44.3 40.2 Pensioners 3.3 40.7 2.0 28.5 14.0 13.3 Students 2.7 30.3 1.5 29.6 6.8 6.3 Other economically not active 4.0 40.6 1.4 31.0 23.5 20.6 Rural communities Economically active 0.8 24.3 1.2 24.0 73.0 77.6 Employed 0.8 23.7 1.0 23.0 65.8 72.9 Hired workers 1.5 20.8 1.0 21.6 19.9 23.5 Self-employed 0.5 23.6 1.0 23.1 31.7 34.9 Other employed 0.5 27.3 1.2 25.0 14.2 14.5 Unemployed * * 4.1 39.0 7.2 4.7 Economically not active 1.7 32.4 3.7 30.8 27.0 22.4 Pensioners 1.8 39.0 7.0 33.6 4.5 3.4 Students 1.3 24.2 1.6 30.0 6.9 5.9 Other economically not active 1.9 35.3 3.7 30.4 15.6 13.1 Total 1.9 29.5 1.4 24.9 100 100 Source: ILCS 2008 and 2017 Note. The asterisk indicates that the indicator is based on less than 25 unweighted cases. 3.5. Consumption Determinants This section examines the factors, which are closely associated with poverty and living conditions (conditional correlations). Identification of these factors is an important step in developing economic and social policies aimed at overcoming and preventing poverty of households. The examined factors are: (1) characteristics of the household, including age composition, size, presence of migrant members, employment status of household members, and household location; as well as (2) characteristics of the household head such as age, gender, education, employment status, and disability. These factors were used as explanatory (independent) variables in a simple regression model, where natural logarithm of consumption per adult equivalent represents the dependent variable. Consumption per adult equivalent proved to be significantly dependent on the following factors: Household demographic description  Household size. Has a negative impact on household consumption; hence, both in 2008 and 2017 larger households, with equality of all other characteristics, had lower consumption (21.3% and 23.4%, respectively).  Household head gender. Over the considered period, female-headed households being similar in all other characteristics had lower welfare than male-headed (6.0% and 6.6%, respectively).  Age composition. The share of children of 0-5 and 15-18 years old had a negative impact on consumption both in 2008 and 2017. The larger is the share of children of that age in the household, the lower the consumption of the household relative to the base category is (compared to share of 46-60 years old persons), with the household size unchanged. The share of the elderly in the household (61 and above) has a positive impact on consumption. 55 Education  Consumption indicator is higher for households headed by a person with tertiary education. Households headed by individuals with tertiary education had 20.3% higher consumption in 2017 as compared to those headed by individuals with elementary or incomplete secondary education (reference category). Migration  Households with members who migrated outside Armenia during the 12 months preceding the 2017 survey had higher consumption (by 16.5%) than those without such members. Participation in labor market  In 2017, labor market status of household members had an important impact on household consumption. The larger the share of unemployed members in a household, the lower (31.4%) is the household consumption compared to the proportion of hired worker members. Household location  Location plays an important role in explaining household welfare in Armenia. Impact of location on the consumption indicator is measured after all other household characteristics included in the model have passed the program control. In 2017, with equality of all other conditions, if a household lived in a province of Armenia (except one province), this factor was reducing the household consumption as compared to the consumption of a household living in Yerevan. 3.6. Consumption, Income and Inequality in Distribution Thereof During the surveyed period (2008-2017), based on aggregate consumption indicator the inequality has increased for the entire population. Based on income indicator, the inequality has decreased. The assumption is that this is due to the increase of the sample size and consequently including small communities that are, in fact, poorer. Despite this, inequality indicators measured by the Gini coefficient indicate that polarization of population in Armenia is deeper in terms of income distribution than in terms of consumption distribution. Consumption inequality measured by the Gini coefficient increased from 0.242 in 2008 to 0.289 in 2017. As to aggregate income, inequality increased from 0.339 in 2008 to 0.359 in 2017. Table 3.17. Armenia. Inequality of Consumption Aggregate and Incomes, 2008, 2016- 2017 Consumption Incomes 2008 2016 2017 2008 2016 2017 Variation coefficient 0.592 0.939 0.997 0.847 0.771 0.825 Gini coefficient 0.242 0.286 0.289 0.339 0.375 0.359 Theil average logarithmic 0.096 0.140 0.204 0.201 0.241 0.232 deviation E(0) Theil entropy index E(1) 0.110 0.182 0.145 0.215 0.238 0.224 Source: ILCS 2008, 2016- 2017 Other methods for assessing inequality, such as the Theil entropy index E (1) and the Theil average logarithmic deviation E (0) showed an increase in polarization of population in Armenia in 2017, as compared to 2008, in terms of income and consumption distribution. 56 3.7. Relative Poverty As described in section 3.1, poverty in Armenia is estimated by comparing a consumption aggregate against an absolute poverty line. This methodology uses a cost of basic needs approach to calculate the poverty line and scores households below a certain absolute threshold to be poor. In contrast with this approach, the concept of relative poverty relates to a notion of social exclusion, according to which all households with income less than 60% of the median income are considered poor. This methodology is widely used in European Union countries and it builds around the idea that poverty is no longer the inability to afford basic things in life but rather describes how some groups are at risk of falling behind the rest of the population. The relative poverty line is calculated as a fraction of average household income for each year. Countries of the European Union usually use 60% of income median as relative poverty line and refer to the threshold as the “at-risk-of-poverty threshold”. In 2017, relative poverty line in Armenia amounted to AMD 40 133 or 96.4% of the upper absolute poverty line. Relative poverty and absolute poverty are different concepts. The relative poverty rate reflects inequalities in the population with a focus on the poor and vulnerable population. In general, increase in relative poverty normally characterizes a situation where income growth for households at the bottom of the welfare distribution is slower than for households with average incomes. The concept of relative poverty is often subjected to heavy critics, because relative poverty rate decreases also when all households become poorer in absolute terms, and the middle class incomes shrink faster than incomes of the poor (which happened in many countries of the European Union as a result of the global economic crisis). Graph 3.10 presents the trend in relative poverty in Armenia (blue bars) and the level of equalized average household income used for the poverty calculations (red line). The increase in relative poverty between 2010 and 2011 from 19.2% to 21.2% illustrates that household incomes in the year 2011 are more unequally distributed than one year earlier – a higher share of the population lived in households who receive less than 60 percent of equalized average income. The increase in relative poverty in 2010-2011 from 19.2% to 21.2% illustrates that household incomes in 2011 were more unequally distributed than in the preceding year, meaning that a higher share of the population lived in households, who receive less than 60 percent of equalized median income. In the period from 2011 to 2017 equalized average income increased from AMD 44 606 to AMD 66 888, and the share of relatively poor households increased from 21.2% to 19.1% Increase of relative poverty (from 18.0% to 19.1%) recorded during 2015-2017 illustrates, that in 2016 incomes of households were more unequally distributed than in the previous year, meaning that a higher share of population lived in households who received less than 60 percent of equalized median income. 57 Graph 3.10. Relative Poverty Measured at 60 Percent of Median Income and Equalized Median Income (AMD, nominal) 25% 80000 median income in Armenian Drams 24% 66888 70000 66068 23% 61319 56705 60000 relative poverty rate 22% 50544 48820 21% 44606 21.8 50000 39709 21.1 20% 35445 36815 40000 21.2 19% 19.7 20.6 30000 19.4 18% 19.3 19.2 19.1 18.0 20000 17% 16% 10000 15% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 relative poverty rate (left axis) median income, nominal (right axis) Source: ILCS 2008-2017 3.8. Poverty Rate in Countries of the Region5 Global update of international poverty line Under its mandate to calculate key indicators on poverty and shared prosperity, the World Bank produces international poverty estimates comparable across countries and years. The guiding principle of international poverty estimates is to count the number of poor people in the world in terms of some absolute standard to measure progress on global goals set by the World Bank, the United Nations, and other development partners. While at the national level, poverty estimations that consider local patterns of consumption are more appropriate for country-specific analysis, underpinning policy dialogue or targeting programs to reach the poorest, the international poverty estimates allow for comparisons across countries with very different national poverty measurement methodologies. International poverty estimates are based on the international poverty line and are useful for the purpose of international comparisons and cross-country benchmarking. Differences in purchasing power across countries, as well as in terms of the methodological approaches used to calculate national poverty lines and welfare aggregates make the use of national poverty rates for international comparisons difficult, thus providing a rationale for an international poverty line. This line complements national poverty lines and can help benchmark the situation in a particular country or its relative performance when it comes to poverty reductions efforts. However, national poverty lines should still be the preferred tool for the purpose of the in-country dialogue as they best capture the country context. 5 This sub-section was developed jointly by the Statistical Committee and the World Bank. 58 The World Bank updated in 2017 the methodology for calculating the international poverty line6 from PPP 2005 to PPP 2011. Calculating international poverty estimates entails two steps: updating the international poverty line and constructing internationally comparable welfare aggregates. For this purpose, the update uses the most recent findings from the International Comparison Program (ICP), which facilitates the calculation of 2011 Purchasing Power Parities (PPP). In 2005, an international poverty line of US$1.25 2005 PPP a day was obtained as the average national poverty lines of the then poorest fifteen countries in the world. When expressed in 2011 prices, this line becomes US$1.90 2011 PPP a day. For constructing internationally comparable welfare aggregates, the World Bank harmonizes information collected in local household surveys, maximizing comparability across countries for the construction of a common welfare aggregate. Welfare aggregates are adjusted, as well, by applying the new PPP factor obtained for each country, so that they all are expressed in terms of the same purchasing power. Income Class Poverty Lines In addition to the international poverty line, the World Bank uses income class poverty lines which facilitate comparison between countries at similar stages of development. 7 The income class poverty lines are defined for the lower middle income and upper middle income countries and are based on the national poverty lines of the countries in each group. As such, they provide a more appropriate threshold to measure poverty for countries in the income class. The lines are defined at US$3.2 2011 PPP line (lower middle-income countries) and US$5.5 2011 PPP line (upper middle income countries)8, and the welfare aggregate used is the same harmonized one used for the international poverty line. The World Bank will report poverty estimates based on the income class lines and will stop reporting poverty estimates based on the regional poverty lines which had been used in the past to compare poverty rates and trends across countries within regions. The new income class poverty lines and the previously used regional poverty lines are defined using different groups of references and, hence, do not produce comparable poverty estimates. 6 In 2015, a commission of experts, led by Sir Tony Atkinson, provided 21 recommendations to improve the existing poverty work conducted by the World Bank. The resulting report, known as the “Atkinson report”, recommend that the World Bank will refer to the global poverty line at $1.9 per day in 2011 PPP as international poverty line to avoid confusion around the monetary value of the line. 7 With the transition from 2005 PPP to 2011 PPP, the World Bank has also revised regional poverty lines. See: Jolliffe, D. & Prydz, E.B. J Econ Inequal (2016) 14: 185. doi:10.1007/s10888-016-9327-5. 8 The two complementary global poverty lines are introduced based on recommendations from the “Atkinson Report”. 59 The World Bank produces internationally comparable poverty rates for countries by applying the international and income class poverty lines. For countries in the Europe and Central Asia region, the World Bank uses the international poverty line and the poverty lines of US$3.2/day 2011 PPP and US$5.5/day 2011 PPP. Results are presented in Figure 3.11. Source: World Bank calculations based on ECAPOV. Note: Population below $1.90, $3.20, or $5.50 per person per day is the percentage of the population living on less than $1.90, $3.20, or $5.50 a day at 2011 international prices. Poverty Estimates in Armenia The update of poverty estimates from 2005 PPP to 2011 PPP preserves the trends observed in recent years in Armenia (Figure 3.12). Applying the new ICP adjustments, and estimating poverty at the international poverty line (US$1.90 2011 PPP per day) results in similar poverty estimates for Armenia like using the 2005 PPP. Poverty is estimated at 1.4 percent in 2017. Moreover, the trend observed since 2001 is consistent across the 2005 PPP and 2011 PPP series. 60 Figure 3.12: Armenia Poverty trend using the international poverty line and previous line at for US$ 1.25 2005 PPP Source: World Bank PovCalNet. Note: Labels refer to international poverty line (PPP 2011). Source: World Bank PovCalNet. Note: Labels refer to income class poverty line (PPP 2011). 61 3.9. Multidimensional Poverty in Armenia9 Poverty has been described as a deprivation in wellbeing, a lack of key capabilities, and a type of “economic scarcity” of basic needs. A measure of multidimensional poverty captures the complexity, depth and persistence of poverty and offers important information to complement the analysis of monetary (consumption) poverty. The Armenian national measure for multidimensional poverty was launched in 2016 by the National Statistical Service of the Republic of Armenia and accompanied by a working paper and online interactive dashboard in 2017 (Martirosova et al. 2017).10,11 Monetary poverty in itself is multidimensional but does not describe all the aspects of wellbeing. By construction, good health and adequate education are dimensions not necessarily fully captured by monetary poverty. These two dimensions can be partly accounted for in household expenses, but pricing the value of public services is challenging. In addition, both health and education have additional values that might not be reflected by the cost of the goods consumed. In the same way, having a job has an intrinsic significance beyond the salary earned; it gives a sense of accomplishment and of belonging to the community and society. Having adequate and affordable housing and heating is not only important for the standard of living but relates to one’s self-worth. From a policy perspective, deprivations are areas of human development where gaps in endowment are often persistent over time; hence, deprivations can negatively influence the future capacity of a household to escape poverty and vulnerability. Deprivations selected for examining multidimensional poverty, are thus meant to complement analysis on monetary poverty with information that has a non-pecuniary value. The national measure of multidimensional poverty is tailored towards the country context and reflects a series of consultations with stakeholders on how to describe the experience of poverty in the country. While this approach limits international comparability, the value-added of the national measure comes from the close alignment with deprivations as identified by Armenians themselves. For instance, increases in prices for gas and electricity required many households to allocate larger amounts to finance higher cost for heating; at the same time, the share of households which is now using wood or coal to heat their homes has increased substantially. In an environment where these circumstances shape the experience of poverty, the measure of multidimensional poverty includes a deprivation on “healthy heating”. This deprivation, not only emphasizes the importance of decent housing conditions, it also accounts for the negative implications of abovementioned mitigation strategies with regards to health and environment. The selection of deprivations reflects the experience of poverty in Armenia and facilitates a discussion on policies for improving wellbeing. The five dimensions in the measure are basic needs, housing, education, labor and health. The measure builds on data from the Integrated Living Conditions Survey (ILCS) allowing for nationally representative temporal analysis that can be linked to monetary poverty. However, using the ILCS constrains the selection of deprivations to existing data. Table 3.18. summarizes the dimensions and indicators which allow for a subjective evaluation of deprivations. 9 This sub-section was developed jointly by the Statistical Committee and the World Bank. 10 Martirosova, Diana; Inan, Osman Kaan; Meyer, Moritz; Sinha, Nistha. 2017. The many faces of deprivation: a multidimensional approach to poverty in Armenia. Poverty and Equity Global Practice Working Paper Series; no. 117. Washington, D.C.: World Bank Group. 11 Short url for online dashboard: https://goo.gl/fyhKfJ 62 Table 3.18: Selected dimensions and indicators for a measure of multidimensional poverty Dimension: Basic needs A household is deprived, if … Extreme poverty not having access to minimum requirement of food (according to national poverty measurement methodology and FAO recommendations) Life in dignity not having funds to buy, when necessary, food and/or cloths Humanitarian aid being dependent on humanitarian assistance to ensure basic functioning of living Remittance being dependent on remittances to ensure basic functioning of dependent living or being in extreme (food) poverty Dimension: A household is deprived, if … Housing Satisfaction of housing not having access to adequate housing: housing conditions are conditions evaluated as bad or very bad Adequate housing not having access to adequate housing: available housing requires major repairs, is dump, slum, or old; adequate flooring and adequate walls Overcrowding available housing floor space does not exceed 20 sq. meters per person adult equivalent Healthy heating household uses wood, carbon or other heating means as primary source for heating Centralized water no access (use) to centralized water system system Centralized sanitation no access (use) to centralized sanitation or garbage disposal and garbage disposal system Hot running water no access (use) of hot running water Quality of paid public not satisfied in one third or more paid services (relative to all services answered): water supply, sanitation, garbage collection, telephone, electric supply, post, banking, irrigation, public transportation Access to transportation not having access to opportunities: no or poor transportation and road networks (all- year road) Dimension: A household is deprived, if … Education 63 No secondary education present: all household member between the age of 15 years and 75 years have less than secondary education (vocational or professional) Schooling enrollment future: at least one child of compulsory schooling age between 6 rate and 17 years is not attending school Access to education not having access to kindergarten, complete secondary school, services primary (general) school in the neighborhood Quality of education not satisfied with education services services Dimension: A household is deprived, if … Labor Labor market more than half of household members in the working age participation population do not participate in the labor market Long term at least one household member is not working due to long term unemployment unemployment (structural) Decent jobs not having access to decent jobs - employment status is own account worker Underemployment not having access to a full position in the labor market (underemployment, and seasonal/occasional employment for all members) Dimension: A household is deprived, if … Health Termination of usual at least one household member did terminate usual activities activity because of illness, injury, or bad health. Affordability of health not having funds to pay for required health services (excluding services dentist) in a health care facility (in case of no or difficult access to free services), tests, examinations and procedures prescribed by a doctor Access to health services not having access to health care facility, emergency ambulance services, pharmacies in the neighborhood Quality of health not satisfied with health services services The measure of multidimensional poverty summarizes information on multiple deprivations and describes the complexity, depth and persistence of poverty. As such, it not only captures the share of individuals living in households which experience a specific deprivation but it also looks into the count and overlap of deprivations which are experienced simultaneously by the same individual. By 64 definition, all household members are deprived in a certain dimension (whether it be basic needs, housing, education, labor or health) if they report deprivations in more than one quarter of all weighted indicators within that dimension. For instance, all household members are deprived in terms of basic needs if the household “does not have sufficient funds to buy, when necessary, food and/or cloth” and if the household simultaneously “is dependent on humanitarian assistance to ensure basic functioning of living” (see Table 3.18). While, at an aggregate level, all household members are multi-dimensionally poor if they are deprived in more than one quarter of all weighted indicators. Table 3.19: Share of individuals living in households which are considered multi-dimensionally poor, by location (as percentage of population) Other urban National level Rural areas areas Yerevan 2010 41.2 52.8 37.2 32.6 2011 33.9 43.3 30.4 27.3 2012 31.3 38.3 30.1 25.1 2013 30.5 37.2 27.6 25.8 2014 31.9 35.2 31.6 28.5 2015 29.1 32.7 25.9 28.0 2016 27.8 30.3 24.7 28.0 2017 26.0 32.5 22.0 21.9 Source: ILCS 2010 to 2017 Findings in Table 3.19. show a decrease in multi-dimensional poverty since the crisis year 2010. At the national level, the share of the population which is multi-dimensionally poor fell from 41.2 percent in 2010 to 26.0 percent in 2017. Breaking down the share of the population being multi- dimensionally poor by location of residence offers useful insights and presents a different picture than that provided by monetary poverty. In 2010, 52.8 percent of rural population and 37.2 percent of those in non-Yerevan urban areas were multi-dimensionally poor; in contrast, 32.6 percent of the population in Yerevan were found to be so. During 2011-2017, multidimensional poverty declined. In 2017, it was 22.0 percent in other urban areas, 21.9 percent in Yerevan and 32.5 percent in rural areas. Despite overall decline of multidimensional poverty in rural areas since 2011, there was an increase of 2.2 percentage points as compared to 2016. Despite the positive development trend between 2010 and 2017 (with consumption poverty declining by more than 10 percentage points), the large majority of households still experiences deprivations in one or more dimensions. Figure 3.14 breaks down the entire population of Armenia into the percentage that experience no (or zero) deprivations or deprivations in 1, 2, 3, 4 or all 5 dimensions. These statistics focus on the intensity or depth of poverty. Between 2010 and 2017 the share of the population living in households which was not deprived in any of the five dimensions increased from 20.0 percent to 32.6 percent. Simultaneously, the share of the population being deprived in 2 or more dimensions decreased from 39.0 percent to 21.4 percent. Further analysis on which dimensions 65 rural residents or urban residents are deprived can help policy makers in identifying priorities to reduce the development gaps in all parts of Armenia. Source: ILCS 2010 to 2017 Figure 3.15. illustrates that the nature of multidimensional poverty differs systematically between the capital city Yerevan, other urban areas and rural areas in the country. In 2017, regional disparities were biggest for the dimension on housing. Most countries show large gaps in the availability of public infrastructure and housing conditions between urban and rural areas which do reflect differences in climate and geography. These gaps also link to higher cost in the provision of public goods and services in rural areas (and even outside the capital city) and are often rationalized in terms of cost-benefit analysis. Yet, the non-availability or limited access (in combination with non-affordability) heavily influence the experience of poverty in the country and illustrate how a focus on multidimensional poverty complements the analysis on monetary poverty. 66 Figure 3.15: Share of individuals living in households deprived in each of the five dimensions of multidimensional poverty, by location (as percentage of population) Source: ILCS 2010 to 2017 Figure 3.16: Share of individuals living in households deprived in each of the five dimensions of multidimensional poverty, by poverty status (year 2017)(as percentage of population) 60.0 51.2 48.3 50.0 38.0 36.5 40.0 30.7 30.0 22.0 18.9 18.7 20.0 15.1 10.0 5.8 1.3 2.0 0.0 Aggregate MPI Basic Needs Housing Education Labor Health Monetary Non-Poor Monetary Poor Source: ILCS 2017 The dimensions on education and labor show systematic differences between households living in urban and rural areas. Even though the share of the population being deprived in the dimensions on education has decreased between 2010 and 2017, households in rural areas still show an inferior asset endowment. Also, the level and trend of deprivations in the dimension on labor differs largely by location. 67 Altogether, the analysis on multidimensional poverty complements findings on monetary poverty as well as illustrates that there are strong linkages between the two different concepts. Figure 3.16 shows that for all dimensions the share of households being deprived either in basic needs, housing, education, labor or health is higher among monetary poor households than monetary non-poor households. However, findings also highlight that among households that are not monetary poor (above the national poverty line), there is a large share of households reporting deprivations associated to one of the five dimensions. These numbers suggest that a large share of the population remains vulnerable to poverty as their insufficient endowment limits their functioning and capabilities. Figure 3.17: Overlap of Deprivations in Labor, Education, and Health Dimensions (2017) Labor Health 31.7 7.8 9.7 0.3 0.3 0.3 0.7 Education Source: Author’s calculations based on ILCS 2017 Deprivations in multiple dimensions often explain the persistence and complexity of poverty. The overlap of development gaps related to labor, education and health demonstrates how households which have limited access to education also suffer from low labor force participation and unemployment. Moreover, deficits related to labor markets often coincide with health problems. Figure 3.17. shows the overlap of deprivation across three dimensions in 2017. In total, 50.7 percent of the population was deprived in at least one of these dimensions. The majority, at 31.7 percent, was deprived only in the labor dimension while 7.8 percent was deprived in both labor and health. Only 0.3 percent of the population was deprived in labor, health and education at the same time, mainly driven by the overall low level of deprivation in the education dimension. 68 3.10. Social Exclusions in Armenia According to EU approaches, material exclusion is the dimension, which reflects iniability of the majority of people to obtain some desirable or even necessary goods to live the acceptable level of life. This indicator distinguishes between the people who cannot afford some goods or services, and those who do not have the said goods or services due to other reasons, for instance because they don’t want or they don’t need those goods or services. Within the scope of «Strengthening of Armenia National Statistical System –II Phase» twinning project, with the objective to develop the statistics of social exclusions, all the households already included in ILCS 2016 answered the questions of social exclusions module questionnaire. Since 2017 all the questions from the module have been included into the ILCS questionnaire. In general, the study of social exclusion supplements the analysis of monetary and multidimensional poverty, as well as testifies to the distinct connections between these three different concepts. The year of 2018 is marked as the last year that Eurostat requires collecting data on social exclusion based on nine key indices. Starting from 2019, the old group of indices composed of 9 items will not be used to maintain the compatibility with Eurostat countries. Thus, in 2019 there will be a transition to a new group of indices composed of 13 items to ensure compatibility with Eurostat. The indicator for prevalenc of deprivation (composed of 13 elements) will be calculated based on the following: the threshold of material deprivation is the presence of at least 5 elements out of 13 items, and severe material deprivation threshold is at least 7 from 13. The data based on the revised indices will be collected starting from 2019. Irrespective of these changes, the Statistical Committee of RA will modernize its approaches from 2019 onwards based on Eurostat methodology to maintain compatibility. The table below shows the prevalence of deprivation related to 9 indices. Table 3.20. Armenia. Nine Key Indices of Social Inclusions, 2017 Indices % Cannot afford A one-week annual vacation away from home, including staying in the second dwelling or at 69 friends’/ family members’ (full household) Payment from own resources the unexpected expenditures of AMD 45.000 (without 55 borrowing or asking for financial assistance) Meal with meat, chicken, fish (or equivalent vegetarian) every other day 38 A car 42 Adequate heating at home 51 Rent or mortgage fee for the main dwelling 19 A mobile of fixed telephone 3 A washing machine 0 A TV set 0 Source: ILCS 2017 69 The index of deprivation prevalence (consisting of 9 items) is calculated as follows: the material deprivation threshold is the presence of 3 of the 9 items, and severe material deprivation threshold is the presence of at least 4 out of 9 items. The table below illustrates the rate of material deprivation by different thresholds. The Eurostat’s threshold of material deprivation consisting of three items shows that according to Eurostat definition, 58% of Armenians are materially deprived. Considering the threshold consisting of at least four deprivations, the rate of severe material deprivation amounted to 40%. Table 3.21. Armenia. Social Exclusions. Distribution of Households by the Number of Deprivations, 2017 Benchmarks Population, % One or more deprivation 90 Two or more deprivation 75 Three or more deprivation 58 Eurostat’s threshold of material deprivation Four or more deprivation 40 Eurostat’s threshold of severe material deprivation Five or more deprivation 21 Six or more deprivation 7 Seven or more deprivation 1 Eight or more deprivation 0 Nine or more deprivation 0 Source: ILCS 2017 So, the Statistical Committee of RA computed the rate of material deprivation with different thresholds, which are used for international comparisons of severe material deprivation indices. Graph 3.18. International Comparisons of Severe Material Deprivation Indices New versions of deprivation indices The table below illustrates deprivation indices revised by EU, which will be collected from 2019. 70 Table 3.22. Armenia. New 13 Indices of Social Exclusions, 2017 Indices % of deprived population, by indices Cannot afford One week’s holiday away from home (the whole household) 69 Replace worn furniture, including separate furniture items 64 Meet unexpected expenditures of AMD 45.000 from own resources (without 55 borrowing or asking for financial assistance) Regular participation out of home (several times a year) in paid entertainment events 35 such as sports, cinema, concert, etc. Meal with meat, chicken, fish (or equivalent vegetarian) every other day 38 A car 42 Spend weekly for own needs a small amount of money (without having to consult 9 with anyone) At least once a month take part in a dinner party with friends/ family/relatives 32 Adequate heating at home 51 Timely repay of rent or mortgage fees for dwelling 19 Replace worn clothes (including old-style clothes) by new clothing not used before 52 Mobiletelephone 3 Internet connection 0 Source: ILCS 2017 The data brought in the table below show the rate ofpopulation deprivation according to the number of indicated indices. Table 3.23. Armenia. Share of Households Deprived of at Least Indicated Indicators, 2017 % in the population Deprived of 1 or more indicators 96 Deprived of 2 or more indicators 92 Deprived of 3 or more indicators 85 Deprived of 4 or more indicators 79 Deprived of 5 or more indicators 71 Deprived of 6 or more indicators 60 Deprived of 7 or more indicators 48 Deprived of 8 or more indicators 36 Deprived of 9 or more indicators 25 Deprived of 10 or more indicators 15 Deprived of 11 or more indicators 8 Deprived of 12 or more indicators 3 Deprived of 13 or more indicators 0 Source: ILCS 2017 It is expected, that deprivation threshold revised by Eurostat will include 5, 6 or 7 and more indicators out of the set of selected 13. 71 Map 1. Armenia: Poverty by Consumption Aggregate, by Provinces and Yerevan City, 2017 Source. ILCS 2017 72 Chapter 4: Poverty in Rural Communities In 2017, poverty rate in rural communities was higher than the national average (26.8% against 25.7%) (Chapter 3; Table 3.1, Table 4.1). 67% of rural households that owned land or livestock reported income from their agricultural activities in 2017. 86.9% of rural households were engaged in plant cultivation and 58.6% in livestock breeding activities. At that, 57.1% of rural households were engaged in both plant cultivation and livestock breeding simultaneously. 4.1 Poverty Rate Dynamics in Rural Communities Compared with 2008, poverty rate in 2017 was lower by 0.7 percentage points in rural communities and 2.6 percentage points in urban communities. The urban/ rural difference in poverty rates was rather small – 26.8% in rural communities and 25.0% in urban communities (Table 4.1; Graph 4.1). Table 4.1 – Armenia: Poverty Rate Dynamics in Rural and Urban Communities, 2008 and 2017 (percent) 2017 / 2008 change 2008 2017 (percentage points) Extremely Extremely Extremely Poor Poor Poor poor poor poor Rural communities 1.2 27.5 1.9 26.8 0.7 -0.7 Urban communities 1.9 27.6 1.2 25.0 -0.7 -2.6 Total 1.6 27.6 1.4 25.7 -0.2 -1.9 Source: ILCS 2008 and 2017 In 2017, as much as 1.9% of rural population and 1.2% of urban population was extremely poor. Over the period of 2008-2017, extreme poverty rate increased by 0.7 percentage points in rural communities and decreased by 0.7 percentage points in urban communities. Graph 4.1 – Armenia: Poverty Rate, by Urban and Rural Communities, 2008 and 2017 (percent) 30 27.5 27.6 27.6 26.8 25 25.7 25 20 Rural communities 15 Urban communities 10 Total 5 1.2 1.9 1.6 1.9 1.2 1.4 0 Extremely poor Poor Extremely poor Poor 2008 2017 Source: ILCS 2008 and 2017 73 4.2. Gross Income and Consumption (Consumption Aggregate) of Rural Households over 2008-2017 Over the period of 2008-2017, the average gross income in comparable prices increased in rural communities 1.4 times (Table 4.2). On average, in 2017 only 26.8% of the gross (per capita) household income in rural communities was generated through agricultural activity (sales of agricultural products and livestock, consumption of own production food) against 38.8% in 2008, 35.6% in 2009, 29.4% in 2010, 32.4% in 2011, 30.8% in 2012, 30.9% in 2013, 28.5% in 2014, 25.6 in 2015 and 26.4 in 2016 (Chapter 6, Table 6.2). At the same time, the share of income from hired employment increased from 29.6% in 2008 to 36.3% in 2017. The share of income from self-employment increased (from 4.1% to 6.2%). Within the composition of gross income, the share of state transfers, that is pensions and social assistance, decreased from 17.3% in 2008 to 16.3% in 2017. The importance of remittances from relatives residing outside Armenia as a source of income for rural households increased, from 6.6% of gross income in 2008 to 10.0% in 2017. The share of remittances from relatives residing in Armenia decreased by 0.4 percentage points (from 0.7% in 2008 to 0.3% in 2017) (Chapter 6, Table 6.2). Table 4.2 presents the changes in monthly income and consumption of rural population over the period of 2008-2017, expressed by quintile distribution of per adult equivalent consumption. In general, the average consumption of rural population over 2008-2017 increased by 4.4%, whereas the average income increased 1.4 times. Real income increased in the third, fourth and fifth quintiles of consumption. In the fifth quintile the increase was as high as 2.1 times. Income decreased in the poorest first quintile 1.4 times or by 39%, as well as in the second quintile by 5%. At the same time, real consumption increased in all quintiles except for the first one, in which it decreased by 1.5%. Table 4.2 – Armenia: Gross Income and Consumption Aggregate of Rural Population in 2008 and 2017, by Quintile Groups* (per Adult Equivalent, per Month, on average Prices of 2008) (AMD) Quintile groups of consumption aggregate* I II III IV V Average Consumption per adult equivalent 2008 23 335 30 780 38 164 46 672 69 418 41 691 2017 22 980 31 264 38 307 48 022 77 207 43 546 Gross income per adult equivalent 2008 30 663 36 036 41 639 45 090 60 239 42 745 2017 18 836 34 266 47 523 66 085 124 467 58 227 Change between 2008 and 2017 (Percent) Consumption -1.5 1.6 0.4 2.9 11.2 4.4 Income -38.6 -4.9 14.1 46.6 106.6 36.2 Source: ILCS 2008 and 2017 Note: * The distribution into quintile groups of consumption aggregate was done for rural population 74 Over the period of 2008-2017, due to the changes in household income within various quintiles the average income of rural households increased 1.4 times, while growing real consumption in all quintiles resulted in 4.4% increase of average consumption by rural households. Graph 4.2 – Armenia: Difference in Consumption and Gross Income of Rural Households, 2008 and 2017 (percent) 120 106.6 100 80 60 46.6 40 36.2 Consumption 14.1 20 11.2 Income -4.9 2.9 4.4 0 -1.5 0.4 First Second 1.6 Third Fourth Fifth Total -20 -38.6 -40 -60 Source: ILCS 2008 and 2017 4.3. Poverty Profile in Rural Communities for 2017 According to available data, the underdeveloped condition of both physical infrastructures and financial opportunities (roads, irrigation systems, availability of facilities for the processing, storage, and preservation of agricultural products, access to finance etc.) is one of the key factors impeding rural development in Armenia. Hence, poverty rate is higher among households, which are deprived of land or own only a small piece of land, have limited access to irrigation, lack or very limited access to agricultural machinery or production capacities, and limited sources of financing. Geographical location: As in earlier years, rural population living in the regions less favorable for agricultural activity tended to be poorer. In 2017, poverty rate was higher in communities located at 1300-1700 meters above the sea level (Table 4.3). Table 4.3 – Armenia: Poverty Rate in Rural Communities, by Geographical Location, 2008 and 2017 (percent) Including, above sea level Total Up to 1300 m 1300-1700 m 1700 m and higher 2008 2017 2008 2017 2008 2017 2008 2017 Non poor 72.5 73.2 77.5 75.7 71.8 67.2 67.3 72.9 Poor (excluded the 26.3 24.9 21.9 23.3 26.4 29.5 31.2 24.7 extremely poor) Extremely poor 1.2 1.9 0.6 1.0 1.8 3.3 1.5 2.4 Source: ILCS 2008 and 2017 75 Availability of land: Land ownership plays an important role in the reduction of rural poverty. 5.9% of landless households living in rural communities were exposed to the highest risk of poverty (28.0%). Among owners of land, poverty rate was the highest in case of households owning up to 0.2 hectares had (27.7%) (Table 4.4). Table 4.4 – Armenia: Poverty Rate in Rural Communities, by Availability and Size of Land, 2008 and 2017 (percent) 2008 2017 Size of land Poor (excluded Poor (excluded Percentage Extremely Extremely Percentage share in (hectare) the extremely the extremely share in poor poor poor rural population poor) poor) population 0 0.5 21.4 2.5 28.0 7.3 5.9 Up to 0.2 1.1 24.3 1.6 27.7 40.0 32.8 0.2 – 0.5 0.9 20.9 1.2 21.5 13.1 13.9 0.5 – 1 1.7 20.5 0.3 17.7 13.1 16.8 More than 1 0.5 28.2 1.5 19.7 26.5 30.6 Total, rural 1.4 24.4 1.3 22.7 100 100 communities Source: ILCS 2008 and 2017 In 2017, access to and use of land among rural households was as follows: 87.1% of households fully or partially used their land, 7.0% failed to use their land, while the other 5.9% had no land. Land quality: The household survey does not provide sufficient information on the quality of land; therefore, availability of watering is regarded as an indicator of land quality, as it preconditions harvest and fertility outcomes. According to survey findings, 52.5% of households engaged in land cultivation irrigated their land. Meanwhile, as shown in Table 4.5, the share of irrigated land constituted only 24.5% of cultivated land. Table 4.5 – Armenia: Cultivated Land, by Watering Method, 2017 (percent) Including Total cultivated Share of cultivated land, which has: Adjacent to Non adjacent to land house house Irrigation water (waterway/ channel) 24.5 50.5 20.7 Drinkable water or deep-water well 2.8 20.6 0.2 Natural sources only (rivers etc.) 1.3 6.1 0.6 Both irrigation and drinkable water or deep-water 0.2 1.5 - wells Both irrigation and natural sources (rivers, runlets, 0.4 0.5 0.4 lakes etc.) Other combinations of watering methods - - - Collected rainwater, snowmelt water 0.7 2.9 0.4 Rainwater only 70.1 17.9 77.7 Total land 100 100 100 Source: ILCS 2017 76 The share of cultivated land that rural households are able to irrigate is presented in the table below. Particularly, only 58.7% of land was irrigated up to 75-100%, whereas 26.3% was irrigated up to 25% only. Table 4.6 – Armenia: Irrigated Land, by Share in Cultivated Land and by Household Poverty Rate, 2017 (percent) Share of irrigated land in total Poor (excluded the Extremely Non poor Total cultivated land extremely poor) poor Up to 25% 27.6 20.9 21.8 26.3 25-50% 8.4 8.1 - 8.3 50-75% 6.2 8.5 21.7 6.7 75%-100% 57.8 62.5 56.5 58.7 Total 100 100 100 100 Source: ILCS 2017 Graph 4.3 – Armenia: Irrigated Land, by Share in Cultivated Land and by Household Poverty Rate, 2017 (percent) 70 62.5 57.8 56.5 58.7 60 50 40 27.6 26.3 30 21.8 21.7 20.9 20 8.4 6.2 8.1 8.5 8.3 6.7 10 0 0 Non-poor Poor Extremely poor Total Up to 25% 25-50% 50-75% 75%-100% Source: ILCS 2017 The proportion of fertile land irrigated up to 75-100% was the largest in Ararat Valley (Ararat and Armavir regions) and the smallest in Syunik, Tavush and Lori regions (Table 4.7). Table 4.7 – Armenia: Irrigated Land, by Share in Cultivated Land and by Regions, 2017 (percent) Up to 25% 25-50% 50-75% 75%-100% Total Aragatsotn 22.6 9.0 8.5 59.9 100 Ararat 3.5 4.5 9.2 82.8 100 Armavir 9.6 3.8 4.7 81.9 100 Gegharkunik 52.6 7.2 3.3 36.9 100 Lori 49.6 19.0 1.5 29.9 100 Kotayk 48.8 9.9 5.8 35.5 100 Shirak 39.8 10.6 11.1 38.5 100 Syunik 42.7 31.2 15.5 10.6 100 Vayotz Dzor 17.2 11.4 6.4 65.0 100 Tavush 47.4 13.5 9.3 29.8 100 Total 26.4 8.2 6.7 58.7 100 Source: ILCS 2017 77 According to ILCS 2017 data, among rural households, which fully or partially (in conjunction with other methods) irrigated their land, 74.0% were members of a water user association. 71.8% of non- member households responded that such associations did not exist in their village, whereas 27.4% did not wish to join a water user association, and the other 0.8% referred to other reasons. According to survey findings, 64.0% of households received irrigation water in sufficient quantities and in time, 13.1% – in sufficient quantities, but not in time, 2.9% – in time, but not in sufficient quantities, and 20.0% of households received irrigation water neither in sufficient quantities nor in time. The most important reasons identified for disruptions in irrigation water supply included technically deficient waterlines (37.0%), pump breakdowns (16.9%), problems with the local network (14.7%), overdue payments (3.9%) etc. 91.6% of households made a full or partial payment for used irrigation water, while 8.4% of households failed to make any payment, of which 38.5% failed to pay due to the lack of money, 11.5% – for not having received the necessary quantity of irrigation water, and 6.7% – due to irregular, in terms of timing, supply of irrigation water. As part of the survey, households were inquired about the operation of irrigation systems during the agricultural seasons in the past two years (for 2016, the respective indicators were compared with those of 2015). As stated by 19.1% of respondents, operation of the irrigation system changed during the 2016 agricultural season, as compared to 2015, and 67.1% of the respondents were of the opinion that it had improved significantly or to a certain extent. Among the respondents, 5.6% were of the opinion that the sizes of land changed during the 2016 agricultural season, as compared to 2015, and 37.4% of them believed that it was upsized significantly or to a certain extent, and the rest (62.6%) thought that it was downsized. Access to agricultural machinery: Most agricultural machinery possessed and used by rural households was rather old, aged 6 and more years. At that, in the previous years the respondents identified the lack of 7 defined types of agricultural machinery out of a total of 10 within the subgroup of machinery with a period of use up to 2 years, whereas in 2017 such lack was identified for 3 defined types only (Table 4.8). 78 Table 4.8 – Armenia: Availability of Agricultural Machinery for Households Engaged in Land or Livestock Farming, by Period of Use, 2017 (percent) Total Up to 2 years 3-5 years 6-10 years More than 10 years 14.5 Tractor, mini-tractor 100 15.4 20.1 50.0 Truck 100 12.3 18.2 24.0 45.5 Grain harvesting machine 100 - - 30.3 69.7 Tractor trailer 100 - 6.8 52.0 41.2 Tractor mowing-machine 100 11.4 3.7 29.8 55.1 Fodder harvesting machine 100 33.3 - 46.8 19.9 Seed separator 100 - - - - Tractor seed-drill 100 19.3 6.2 11.2 63.3 Tractor plough 100 5.3 5.6 5.3 83.8 Cultivator 100 5.4 16.6 5.3 72.7 Total 100 10.9 12.7 23.9 52.5 Source: ILCS 2017 Naturally, non-poor households had better opportunities to acquire or rent agricultural machinery than poor households. Among households in possession of agricultural machinery, within the 12 months preceding the 2017 survey only the extremely poor did not acquire any machinery items. Among households in possession of agricultural machinery, 87.5% were non-poor and 12.5% were poor households (excluding the extremely poor households). Both poor and non-poor households were able to use all types of agricultural machinery, except for the seed separator (Table 4.9). Table 4.9 – Armenia: Availability of Agricultural Machinery for Households Engaged in Land or Livestock Farming, by Poverty Rate, 2017 (percent) Poor (excluding the Total Non-poor Extremely poor extremely poor) Tractor, mini-tractor 100 87.3 12.7 - Truck 100 89.0 11.0 - Grain harvesting machine 100 72.7 27.3 - Tractor trailer 100 97.0 3.0 - Tractor mowing-machine 100 85.0 15.0 - Fodder harvesting machine 100 53.5 46.5 - Seed separator - - - - Tractor seed-drill 100 83.0 17.0 - Tractor plough 100 85.6 14.4 - Cultivator 100 85.4 14.6 - Total 100 87.5 12.5 - Source: ILCS 2017 79 Access to agricultural lending or borrowing: According to ILCS 2017 data, 13.6% of surveyed households received loans or borrowed funds for engaging in agricultural activity; among them, 96.8% were rural households and 3.2% were urban households. In the mentioned group of households, 99.2% received loans from banks (including loans funded under government programs or projects of international organizations) and 0.8% borrowed funds from friends, parents, relatives or other sources. In 2017, as much as 16.2% of surveyed rural households received loans or borrowed funds for engaging in agricultural activity. Among them, 99.2% were able to use services of banks (including loans funded under government programs or projects of international organizations), of which 79.8% were non-poor, 18.4% were poor (excluding the extremely poor), and 1.8% were extremely poor households. More detailed data on rural households, by poverty rate, are presented in Table 4.10. Table 4.10 – Armenia: Access to Agricultural Lending or Borrowing for Rural Households, by Poverty Rate, 2008 and 2017 (percent) Poor (excluding Non poor Extremely poor extremely poor) 2008 2017 2008 2017 2008 2017 Total lending or borrowing, including from: 13.3 16.7 7.6 13.9 1.5 22.2  Banks (including loans funded under government programs or projects of 79.6 99.2 86.5 98.9 65.9 100.0 international organizations)  Friends and relatives 19.6 0.8 12.2 1.1 - -  Other sources 0.8 - 1.3 - 34.1 - Source: ILCS 2008 and 2017 On average, in 2017 the key reasons for non-cultivation of land included unprofitability of agricultural activity, lack of access to irrigation and lack of funding as indicated by, respectively, 21.6%, 21.3%, and 18.6% of respondents. Other key reasons for non-cultivation of land include farmer’s poor health and age, remoteness of land and poor quality of soil, which account for, respectively, 13.2%, 9.3% and 7.9% of responses. The reasons for non-cultivation of land, by quintile groups, are presented in Table 4.11. Table 4.11 – Armenia: Reasons for Land Owners Not to Cultivate Land, by Quintile Groups, 2017 (percent) Quintile groups of consumption aggregate* Reasons for non-cultivation I II III IV V Total Remoteness of land 5.7 9.2 10.1 10.0 11.3 9.3 Poor quality of soil 7.4 4.5 9.3 8.7 9.0 7.9 Non irrigated land 28.7 18.6 19.5 21.5 17.4 21.3 Unprofitable business 19.1 19.5 22.2 22.4 24.6 21.6 Lack of funding for 23.0 23.3 17.6 15.6 14.3 18.6 cultivation Farmer’s poor health, age 13.6 13.6 13.2 12.5 13.4 13.2 Other 2.5 11.3 8.1 9.3 10.0 8.1 Total 100 100 100 100 100 100 Source: ILCS 2017 Note: * The distribution into quintile groups of consumption aggregate was done for rural population 80 Rural households indicated certain difficulties encountered during the most recent agricultural season. The most frequent key difficulties included, in descending order of significance, lack of labor force (19.8%), lack of access to agricultural machinery (18.7%), problems with the sales of products (12.2%), lack of wholesale and retail markets (9.1%), dealing with resellers (7.2%), payments for irrigation (6.2%), acquisition of young plants or seeds (4.1%), remuneration of work (3.1%), transportation of products to the market (2.8%), lack of seeds (2.4%) and other problems (14.4%). 4.4. Rural Road Infrastructure and Transportation Means The impact of infrastructure on rural communities appears to be mostly predictable: rural households residing near hard-surface roads and in the vicinity of markets are better off. According to ILCS 2017 data, 44.4% of rural households had some type of transportation means – a passenger car, a truck or another vehicle. Within the 12 months preceding the survey, these households spent on average AMD 172 thousand on fuel, AMD 108 thousand on maintenance (including the cost of spare parts and labor), and AMD 37 thousand on traveling by bus, fixed-run taxi, and taxi. ILCS 2017 findings also revealed that, during a typical month, a rural household usually used transportation means and spent their time to work outside the community – 19.7 days, to sell agricultural products – 6.2 days, to purchase fertilizers and seeds – 1.6 days, and on other purposes – 4.7 days. Table 4.12 demonstrates how rural households assessed the quality of road infrastructure and transportation means. Table 4.12 – Armenia: Quality of Roads and Transportation Means as Assessed by Rural Households, 2017 (percent) Total Bad Average Good Excellent Intra-community roads 100 63.2 32.7 3.8 0.3 Roads linking with regional centers, towns, 16.9 55.7 27.2 0.2 100 markets Buses, minivans, other transportation means 100 18.4 52.3 27.2 2.1 Source: ILCS 2017 The data in Table 4.12 shows that 63% of rural households assessed the condition of intra-community roads as bad (Table 4.12). 17% of rural households assessed the condition of roads linking with regional centers, towns and markets as bad. The quality of transportation means (buses, minivans, and other vehicles) was assessed as bad by 18% of rural households. Accessibility of socio-economic infrastructures for rural households is presented in the table below. 81 Table 4.13 – Armenia: Distance to Nearest Service Facilities in Rural Communities, 2017 (percent) Service facilities Up to 1 km 1-3 km 4-5 km 6-10 km 10 km and more Medical station 75.3 19.9 1.1 2.6 1.1 Hospital 3.7 6.5 8.0 33.1 48.7 Drugstore 36.1 13.0 5.7 18.4 26.8 Community administration 80.4 19.1 0.0 0.4 0.1 Preschool facility 56.7 20.8 2.2 10.9 9.4 Secondary school 75.7 22.2 0.5 1.0 0.6 Agricultural market 0.2 4.1 7.1 27.0 61.6 Bank/ financial institution 0.2 5.8 8.0 31.8 54.2 Source: ILCS 2017 In rural communities the average distance to the nearest agricultural market was 15.2 km, to a bank/ financial service provider – 13.2 km, to a hospital – 12.0 km, to a drugstore – 7.6 km, to a kindergarten – 3.4 km, to a medical station – 1.3 km, to a secondary school – 1.1 km, and to the community administration – 0.9 km. Rural households spent on average 23 minutes to reach an agricultural market, 21 minutes – a bank/ financial service provider, 19 minutes – a hospital, 16 minutes – a drugstore, 13 minutes – a kindergarten, 11 minutes – a secondary school, 11 minutes – a medical station, and 10 minutes – the community administration. Majority of rural households did not make use of a car or bus/ minivan to reach certain service facilities (e.g. a medical station, the community administration, a secondary school, a preschool facility). However, in order to reach service facilities such as a hospital, a bank, an agricultural market or a drugstore, most of rural households made use of a car or a bus. More detailed data on this are presented in Table 4.14. Table 4.14 – Armenia: Transportation Means Used for Reaching Service Facilities in Rural Communities, 2017 (percent) Other (on foot, by taxi, carriage, Service facilities Total Car Bus/ minivan bicycle, motorcycle, horse, donkey) Medical station 100 11.8 2.3 85.9 Hospital 100 66.9 14.5 18.6 Drugstore 100 30.0 26.9 43.1 Community administration 100 8.6 0.9 90.5 Preschool facility 100 17.3 15.1 67.6 Secondary school 100 9.2 1.7 89.1 Agricultural market 100 47.5 46.3 6.2 Bank/ financial institution 100 44.7 49.5 5.8 Source: ILCS 2017 82 Chapter 5: Child Poverty 5.1. Child Poverty This chapter provides an estimate of consumption-based child poverty, material and housing deprivation, as well as reflects on the role of social protection benefits in mitigating poverty. The key findings of the Child Needs Survey conducted in January 1 – December 31, 2017 are also presented in this chapter. In 2017, 2.1% of children below 18 lived in extreme poverty and 30.8% lived in poverty. At that, extreme poverty and poverty rates in Armenia were 1.4% and 25.7%, respectively (Table 5.1). Hence, in comparison with the entire population, children were exposed to a higher risk of both total and extreme poverty. 22.7% of the households with children below 18 received family benefits in 2017. At that, 38.1% of poor households, 55.3% of extremely poor households, and 15.9% of non-poor households were beneficiaries of family benefit. The data for 2017 depict gender differences in child poverty rates; thus, 32.4% of girls and 29.4% of boys were poor (comprising 30.8% of all children). In terms of household location, the extreme poverty rate among children living in urban communities was 1.7% compared to that at 2.7% among children living in rural communities; and the total poverty rate for the same categories was 29.9% and 32.0%, respectively. Table 5.1 – Armenia: Child Poverty Rates, 2017 (percent) Children below Including Population headcount 18 Girls Boys (for comparison) 2.1 (0.4) 2.3 (0.4) 2.0 (0.5) 1.4 (0.2) Extreme poverty {1.2; 3.0} {1.3; 3.1} {0.9; 2.7} {1.0; 1.9} 30.8 (1.0) 32.4 (1.6) 29.4 (0.8) 25.7 (0.6) Total poverty {28.4; 33.1} {28.6; 36.1} {27.6; 31.3} {24.4; 27.0} Source: ILCS 2017 Table 5.2 provides an overview of the dynamics in child poverty rates over 2008-2017; particularly, albeit the decreasing trend of poverty and extreme poverty rates in 2017, they were still higher than the respective indicators of 2008 (by 1.0 and 0.5 percentage points, respectively). Table 5.2 – Armenia: Dynamics of Child Poverty Rates, 2008-2017* (percent) Extremely poor Poor Non-poor 2008 1.6 29.8 70.2 2009 3.8 35.7 64.3 2010 3.7 41.4 58.6 2011 4.7 41.9 58.1 2012 3.3 36.2 63.8 2013 3.3 37.3 62.7 2014 3.3 34.0 66.0 2015 2.5 33.7 66.3 2016 2.0 34.2 65.8 2017 2.1 30.8 69.2 Source: ILCS 2008-2017 * For consistency reasons, the indicators for 2008 have been recalculated as per the methodology used in 2009. 83 Average poverty rates reflect the substantial dependence on various household characteristics. Child poverty rates significantly vary depending on the number of children in the household, the age group of the youngest child, as well as on the characteristics of the household head such as gender, educational level and employment status. There is also significant variation by the share of employed household members and by household location. Children in larger families are more likely to be poor. 40.1% of children in families with 3 or more children below 18 are poor (compared to 30.8% total child poverty rate), and 4.1% of children in large families are extremely poor (compared to 2.1% extreme child poverty rate) (Table 5.3). Children in age groups 0-5 and 15-18 are more likely to be poor. Children in families where the youngest child is 5 years old or younger are exposed to a higher risk of poverty. 33.5% of children in such families are poor, compared to the child poverty rate of 27.7% in families where the youngest child is 6-14 years old. Analysis using the extreme poverty line shows that extreme poverty rate is the highest among families where the youngest child is 15-18 years old (3.3%) and the lowest among families where the youngest child is 6-14 years old (1.6%). Children in female-headed households are more likely to be poor. Around a quarter (25.5%) of all children live in female-headed households; among them, 37.0% are poor, compared to the 28.6% child poverty rate in male-headed households. Marital status of the household head is another important predictor of child poverty. Children in households with a single (never married), widowed or divorced head are more likely to be poor (35.8%) than those in households with married or cohabiting heads (29.5%). Living in a household where the head has higher educational level reduces the risk of poverty. Children living in households where the household head has no education or has primary education only (48.2%), incomplete secondary education (46.6%), general secondary education (36.0%) or vocational secondary education (28.7%) are substantially more likely to be poor than those in households where the head has tertiary education (14.9%). Children in households, where the head has incomplete secondary education, are exposed to the highest risk of extreme poverty. Employment status of the household head is another crucial predictor of child poverty. Children in households where the head has done any profitable work within the past 7 days are at the lowest risk of poverty in terms of both total and extreme poverty. Thus, 27.2% of children with a working head of household are poor, compared to that of 36.8% among children with a non-working head of household. It is worth of mentioning that 37.0% of all children live in households where the head does not work. The number of adult household members in employment also appears to affect child poverty rates. Children in households with no employed adults aged 19-60 years are exposed to the highest risk of poverty (38.5%). The lowest risk of extreme child poverty (1.6%) is observed in households where all adults are employed. It is worth of mentioning that almost half of all children (45.3%) live in households where not all adults aged 19-60 years are employed. 84 Table 5.3–Armenia: Poverty Rates, Gaps and Composition, by Type of Household, 2017 (percent) Total Extreme Percentage Percentage child Povert child share, poor share, all poverty y gap poverty rate children children rate Number of all children (below 18 years) One 1.5 24.5 4.4 16.6 20.9 Two 1.2 27.9 4.7 45.3 49.9 Three or more 4.1 40.1 8.3 38.1 29.2 Gender Girl 2.3 32.3 5.9 48.9 46.5 Boy 2.0 29.4 5.4 51.1 53.5 Age of the youngest child 0-5 2.5 33.5 6.1 48.7 44.7 6-14 1.6 27.7 5.1 43.3 48.1 15-18 3.3 34.0 6.8 8.0 7.2 Number of adults (19 – 60 years) None/ one 2.7 26.5 5.9 10.7 12.5 Two 1.7 28.2 4.9 46.1 50.3 Three 3.4 36.9 6.8 22.6 18.8 Four or more 1.6 34.5 6.3 20.6 18.4 Number of retired adults None 2.3 28.6 5.3 60.8 65.3 One 1.8 35.0 6.4 29.4 25.8 Two or more 1.8 34.1 6.1 9.8 8.9 Number of adults with disability None 2.1 29.3 5.3 81.3 85.3 One or more 2.3 39.0 7.5 18.7 14.7 Number of children with disability None 2.1 30.9 5.7 99.9 99.8 One or more 1 * * * * * Gender of household head (by present population headcount) Male 2.0 28.6 5.2 69.4 74.5 Female 2.6 37.0 7.1 30.6 25.5 Marital status of household head Married/ cohabiting 1.8 29.5 5.1 67.0 71.2 Single/ widowed/ divorced 2.8 35.8 7.1 33.0 28.8 Educational level of household head Elementary and primary 0.0 48.2 8.7 2.8 1.8 Incomplete secondary 6.5 46.6 10.4 11.7 7.8 General secondary 2.1 36.0 6.8 56.2 49.0 Specialized secondary 1.6 28.7 4.6 19.9 21.8 Tertiary 0.7 14.9 2.2 9.4 19.6 Employment status of household head Not worked in the past 7 3.2 36.8 7.3 44.6 37.3 days Worked in the past 7 days 1.5 27.2 4.7 55.4 62.7 1 The asterisk indicates that the indicator is based on less than 25 unweighted cases 85 Total Extreme Percentage Percentage child Povert child share, poor share, all poverty y gap poverty rate children children rate Employment status of adult household members (19-60) No adult works 3.9 38.5 8.5 12.8 10.2 Not all adults work 2.2 34.2 6.1 50.4 45.4 All adults work 1.6 25.3 4.3 27.4 33.3 Not only adults work 2.0 25.9 5.3 9.4 11.1 Total 2.1 30.8 5.7 100 100 Source: ILCS 2017 Child poverty rates substantially vary across regions. Table 5.4 presents data on child poverty rates for Yerevan and 10 regions of the country. The differences across regions are significant both in terms of extreme and total poverty. Extreme child poverty rates vary from the lowest 0.0% (in Aragatsotn. Syunik and Vayotz Dzor regions) to the highest 8.0% (in Shirak region). A similar pattern is observed for total child poverty rates, which are the lowest at 10.9% in Aragatsotn region and the highest at 51.8% in Shirak region. Table 5.4 – Armenia: Poverty Rates, Gap and Composition, by Regions, 2017 (percent) Percentage Percentage Extreme child Total child Poverty gap share, poor share, all poverty rate poverty rate children children Yerevan 1.7 26.9 4.8 24.3 27.8 Aragatsotn 0.0 10.9 1.1 1.5 4.1 Ararat 3.1 28.9 5.8 9.2 9.8 Armavir 1.0 29.1 5.2 10.2 10.8 Gegharkunik 2.5 24.3 4.4 5.6 7.1 Lori 2.1 39.6 7.1 11.9 9.3 Kotayk 0.6 34.6 5.5 12.6 11.2 Shirak 8.0 51.8 13.3 14.9 8.8 Syunik 0.0 25.2 1.7 3.7 4.6 Vayotz Dzor 0.0 19.7 2.6 1.4 2.2 Tavush 2.2 33.7 5.1 4.7 4.3 Total 2.1 30.8 5.7 100 100 Source: ILCS 2017 5.2. Material Deprivation To complement the analysis of consumption-based poverty, this section analyses material deprivation of children in Armenia. Material deprivation is measured as the lack of durable goods in households. The analysis covered the following 9 durable goods: refrigerator, washing machine, mobile telephone, vacuum cleaner, video player, photo camera, audio system, car, and personal computer. The choice of these goods reflects the fact that at least 10% of all households in the 2009-2017 Integrated Living Conditions Surveys owned them. Nonetheless, it is not clear whether the households that lack these items cannot afford them or choose not to have them. 86 When compared with all children, poor children are significantly more likely to live in households lacking any of the above-mentioned durable goods. Children in extremely poor households are the most likely to lack all of these items. For example, while 3.2% of all children live in households without a refrigerator, 5.4% of poor and 17.7% of extremely poor children live in households lacking this item. Likewise, while 56.1% of children live in households without a car, the same indicator for poor and extremely poor children is 82.1% and 98.6%, respectively. Table 5.5 – Armenia: Durable Goods Lacked, 2017 (percent) All children Poor children Extremely poor children Refrigerator 3.2 5.4 17.7 Washing machine 3.2 6.7 16.9 Mobile phone 0 0 0 Vacuum cleaner 22.7 32.8 52.4 Video player 81.2 88.1 97.5 Photo camera 68.4 78.6 91.8 Audio system 70.3 83.1 97.2 Car 56.1 82.1 98.6 Personal computer 25.8 45.0 84.1 Source: ILCS 2017 There are noticeable differences in deprivation rates between poor and non-poor children. 4.2% of all children live in households not lacking any of the listed durable goods, while the respective indicator is 0.7% for poor children and nil for extremely poor children (Table 5.6). However, to achieve a deprivation rate that is comparable with the estimated consumption-based child poverty rate of 30.8% the deprivation threshold is drawn at lacking 5 or more of the listed items. This results in 24.3% of all children experiencing material deprivation. Material poverty rates among poor and extremely poor children are higher at 45.0% and 86.7%, respectively. Table 5.6 – Armenia: Number of Durable Goods Lacked by Households, 2017 (percent) All children Poor children Extremely poor children 0 (all 9 are present) 4.2 0.7 0.0 1 10.9 4.3 0.0 2 15.7 7.5 3.1 3 23.9 18.9 3.4 4 21.0 23.6 6.8 5 15.2 25.4 36.6 6 6.9 14.4 30.4 7 1.6 3.8 10.4 8 0.6 1.4 9.3 9 - - - Source: ILCS 2017 Limitation of this methodology is that the items included in the simple count index may not be of equal importance to the households’ welfare, whereas ILCS 2017 provides no information about the desirability or importance of these durable goods. Furthermore, there is no information on whether the item is lacked because the household cannot afford it or choose not to have it. Using the prevalence weighted deprivation index helps to partially remedy this gap based on the assumption that households 87 are relatively more deprived if they lack an item that most other households have. For example, lacking a refrigerator carries less weight than lacking a personal computer because more households have a refrigerator rather than a personal computer. Each score of 1 given for a lacked item is multiplied by the proportion of children in the weighted sample who live in households owning this item. The scores are then summed across all items and divided by the total number of items, i.e. 9, for each household. The resulting score is multiplied by 100 to establish a continuous variable that ranges from 0 (presence of all items) to 100 (lack of all items that all other households own). On average, prevalence weighted deprivation score is higher among poor children. The average score for all children is 10.6, but for poor and extremely poor children it constitutes 13.3 and 18.3, respectively (Table 5.7). This suggests that poor children live in households lacking the items usually owned by other households. Table 5.7 – Armenia: Average Prevalence Weighted Deprivation Score and Deprivation Rates, 2017 (percent) All children Poor children Extremely poor children Average 10.6 13.3 18.3 Standard deviation 6.0 6.4 8.1 Source: ILCS 2017 5.3. Housing Deprivation Housing problems can adversely affect children’s health, safety, education and social development. ILCS 2017 included questions about housing, such as the number of utility services and rooms in use, as well as questions about housing problems and perceived quality of dwelling conditions. Poor children often live in accommodation lacking important housing amenities. Children in poor households are consistently more likely to live in dwellings without essential housing amenities2, such as hot running water, centralized gas supply, landline telephone, and bathtub or shower (Table 5.8). It is worth to mention that currently landline telephones are supplanted by mobile phones owned by 97% of households. On the other hand, in comparison with all children, extremely poor and poor children are more likely to live in dwellings without any of the below specified amenities (Table 5.8). Table 5.8 – Armenia: Housing Amenities Lacked or Not in Working Order, 2017 (percent) The house lacks: All children Poor children Extremely poor children Centralized water supply 3.1 4.6 8.8 Running hot water 21.5 35.8 74.4 Connection to sewerage system 31.9 34.0 53.4 Centralized gas supply 17.7 22.2 41.9 Bathtub or shower 10.8 16.8 36.5 Kitchen 4.1 7.2 16.8 Landline telephone 75.3 82.1 97.3 Source: ILCS 2017 In comparison with all children, poor children are more likely to lack many of the housing amenities. Only 13% of all children live in houses with all of the listed amenities, while the same indicator for poor 2 The amenity is either not available or not in working order. 88 and extremely poor children constitutes, respectively, 9% and 0.7% (Table 5.9). Children in extremely poor households are the most likely to lack 3 amenities out of the 7 (27.0%) and 4 amenities out of the 7 (19.0%), but the share of households lacking all 7 amenities is not high (4%). Nonetheless, the lack of all 7 amenities was reported in relation to children living in non-poor and poor households (0.2% and 0.4%, respectively). To achieve a housing deprivation rate that is comparable with the consumption-based child poverty rate in 2017 (30.8%), the deprivation threshold is drawn at lacking 2 or more amenities. This results in 38.1% of all children lacking a minimal number of housing amenities. The corresponding rates for poor and extremely poor children are substantially higher at 48.9% and 78.4%, respectively. Table 5.9 – Armenia: Number of Household Amenities Lacked or Not in Working Order, 2017 (percent) All children Poor children Extremely poor children 0 13.2 9.1 0.7 1 48.7 42.0 20.9 2 17.8 17.6 9.7 3 8.7 13.3 27.4 4 6.3 8.7 18.8 5 3.1 5.1 7.0 6 2.0 3.8 11.9 7 0.2 0.4 3.6 Source: ILCS 2017 Poor and, especially, extremely poor children are also more likely to live in substandard housing conditions. In comparison with all children, those in consumption-based poor households are generally more likely to live in dwellings with reported housing problems (Table 5.10). For example, 67% of poor children and 80% of extremely poor children live in households that report poor heating, compared to the relevant indicator at 53% for all children. Then, 37% of poor children and 49% of extremely poor children live in households that report dampness, compared to the relevant indicator at 30% for all children. Some housing problems, such as noisy neighbors and surroundings, heavy traffic and industrial pollution are reported in relation to less than 10% of both all children and children in poor and extremely poor households. Table 5.10 – Armenia: Housing Problems Reported, 2017 (percent) All children Poor children Extremely poor children 1. Insufficient living space 32.9 41.7 59.2 Noisy neighbors and surroun 2.8 2.6 5.4 2. dings 3. Poor lighting 10.6 13.6 33.8 4. Poor heating 52.5 66.7 79.7 5. Dampness 29.9 36.6 48.6 6. Leaking roofs 17.2 24.7 34.4 7. Dilapidated walls and floor 26.1 40.7 75.1 8. Broken frames and doors 22.9 35.1 46.6 9. Heavy traffic 4.7 4.3 3.7 10. Industrial pollution 7.7 8.0 3.1 Frequent breakdowns of 23.8 26.1 6.8 11. elevator 12. Poor water supply 12.9 12.2 9.0 89 All children Poor children Extremely poor children 13. Poor garbage disposal 20.9 22.7 40.7 Poor maintenance of public 34.3 30.7 13.1 14. areas and yards of multi- apartment buildings 15. Other problems 33.9 33.2 43.5 Source: ILCS 2017 Moreover, in comparison with all children, poor children are also more likely to live in households reporting more of the housing problems. Thus, 0% of extremely poor children, 4% of poor children and 10% of all children live in households that do not report any of the 15 housing problems indicated above (Table 5.11). Children in extremely poor households are less likely to live in households reporting only 1 to 3 housing problems, while they are more likely to live in households reporting 4 and more housing problems. 1.2% of all children, 1.9% of poor and 5.3% of extremely poor children live in households reporting 9 or more problems. To achieve a housing deprivation rate comparable with the consumption-based child poverty rate in 2017 (30.8%), the deprivation threshold is drawn at households reporting 4 or more housing problems (32.9%). This results in 49.3% of poor children and 74.7% of extremely poor children having a housing deprivation problem. Table 5.11 – Armenia: Number of Housing Problems Reported, 2017 (percent) Number of Housing All children Poor children Extremely poor children Problems 0 9.8 4.2 0.0 1 21.4 14.6 1.9 2 20.3 16.4 7.6 3 15.6 15.5 15.8 4 11.9 18.2 29.4 5 8.1 9.6 5.8 6 6.0 9.8 6.5 7 3.7 7.1 5.6 8 2.0 2.7 22.1 9 0.7 1.3 5.3 10 0.4 0.6 0.0 11-15 0.1 0.0 0.0 Source: ILCS 2017 Poor children are more likely to live in subjectively substandard housing conditions. While 29% of all children live in households that describe their dwelling conditions as bad or very bad, 41% of poor children and 48% of extremely poor children live in such households. At the same time, 58% of all children live in households with satisfactory housing conditions, while 51% of poor children and 52% of extremely poor children live in such households. In comparison with all children, poor children are 1.7 times less likely to live in households with housing conditions described as good or very good, while extremely poor children have not reported living in such households. 90 Table 5.12 – Armenia: Respondents’ Subjective Assessment of the Quality of Housing Conditions, 2017 (percent) All children Poor children Extremely poor children Good or very good 13.4 7.9 0.0 Satisfactory 58.0 51.4 52.1 Bad or very bad 28.6 40.7 47.9 Source: ILCS 2017 Poor children are more likely to live in overcrowded accommodation. The average number of rooms (excluding kitchens, bathtubs and toilets) per person in the primary dwelling is higher for all children (0.74) in comparison with poor children (0.61) or extremely poor children (0.56). If the threshold is drawn at 0.43 or fewer rooms per person, the overcrowding rate for all children is 13%, compared to the same indicator at 25% for poor children and 33% for extremely poor children (Table 5.13). Table 5.13 – Armenia: Average Number of Rooms per Person and Overcrowding Rates, 2017 All children Poor children Extremely poor children Average number of rooms 0.74 (0.29) 0.61 (0.23) 0.56 (0.19) per person (SD) Overcrowding rate (%) 12.8 24.8 33.0 Source: ILCS 2017 7% of non-poor children and 24% of poor children live in overcrowded accommodation. This rate is the highest (33%) for children in households below the extreme poverty line (Table 5.14). Table 5.14 – Armenia: Overcrowding Rates, by Poverty Status, 2017 (percent) Non-poor Poor children (excluding extremely Extremely poor children poor children) children Not overcrowded 92.9 75.9 67.0 Overcrowded 7.1 24.1 33.0 Source: ILCS 2017 Note: The correlation between overcrowding status and poverty status is statistically significant at p<0.001 5.4. Role of Social Protection Benefits in Poverty Mitigation 5.4.1. Old age pensions Old-age pensions make a difference to average child poverty rates. 47.9% of all children live in households where at least 1 person is reported to receive old-age pension. Table 5.15 shows the difference that pensions make to consumption-based child poverty rates. If pensions were deducted from total monthly household expenditure and the remaining amount was brought into equivalent terms, the extreme child poverty rate would increase from 2.1% to 11.3%, while the total child poverty rate would go up from 30.8% to 42.7%. Hence, pension income makes significant difference to extremely poor households. The extreme poverty rate would increase by 5.4 times if pension income were not counted in consumption. This analysis assumes that pension income is entirely consumed by households. 91 Table 5.15 – Armenia: Child Poverty Rates with and without Old-Age Pension Income, 2017 (percent) Child poverty rate Threshold With pension Without pension Extreme poverty line 2.1 11.3 Total poverty line 30.8 42.7 Source: ILCS 2017 Old-age pension income can make a difference as to whether a child is poor or not (relevant only to households, which have a member receiving old-age pension). Table 5.16 shows the difference that old- age pensions can make to children in poor (and old-age pension beneficiaries) households. If pensions were deducted from their household consumption, 21% of children not considered as extremely poor would have been classed as extremely poor. At the same time, 41% of children not considered as poor would have been classed as poor if pension income were deducted from their household consumption. Table 5.16: Armenia – Child Poverty Rates with and without Old-Age Pension Income (for Old-Age Pension Beneficiaries Households), 2017 (percent) Lifted above extreme poverty line Lifted above total poverty line (with pension) (with pension) Below extreme poverty 20.5 line (without pension) Below total poverty line 40.7 (without pension) Source: ILCS 2017 5.4.2. Family benefits Family benefit income makes a difference to average child poverty rates. 22.7 % of all children live in households in receipt of family benefits. Table 5.17 shows that family benefit income makes a difference to the extreme and total child poverty rate. If family benefits were deducted from the total household expenditure, the extreme child poverty rate would increase from 2.1% to 7.2%, whereas the total child poverty rate would go up by 4.4 percentage points, from 30.8% to 35.2%. This suggests that family benefit income is very important for extremely poor and poor households. Table 5.17 – Armenia: Child Poverty Rates with and without Family Benefit Income, 2017 (percent) Child poverty rate Threshold With family benefit Without family benefit Extreme poverty line 2.1 7.2 Total poverty line 30.8 35.2 Source: ILCS 2017 Family benefit income can also make a difference to the poverty status of a child (relevant only to households in receipt of family benefit). Table 5.18 shows the re-calculated poverty rates for children in family benefit recipient households, which are not considered as poor. If family benefit income were deducted from their household consumption, 23% of children not considered as extremely poor would 92 have been classed as extremely poor. At the same time, 41% of children not considered as poor would have been classed as poor if family benefit income were deducted from their household consumption. Table 5.18 – Armenia: Child Poverty Rates with and without Family Benefit Income (for Family Benefit Recipient Households), 2017 (percent) Lifted above extreme poverty line Lifted above total poverty line (with family benefit) (with family benefit) Below extreme poverty line 23.4 (without family benefit) Below total poverty line 40.5 (without family benefit) Source: ILCS 2017 5.4.3. Childcare Allowances Childcare allowance income does not make a difference to average child poverty rates. According to survey findings, only 1.4% of all children live in households in receipt of childcare allowance. Table 5.19 shows the difference that childcare allowance income makes to average child poverty rates. The extreme and total child poverty rates would remain almost unchanged if childcare allowances were deducted from household consumption, which is indicative of the very low number of childcare allowance beneficiary households. Table 5.19 – Armenia: Child Poverty Rates with and without Childcare Allowance Income, 2017 (percent) Child poverty rate Threshold With childcare allowance Without childcare allowance Extreme poverty line 2.1 2.2 Total poverty line 30.8 31.0 Source: ILCS 2017 Childcare allowance income does not make a difference to the poverty status of a child (relevant only to households in receipt of childcare allowance). If childcare allowance income were deducted from their household consumption, none of the children not considered as extremely poor would have been classed as extremely poor. At the same time, none of the children not considered as poor would have been classed as poor if childcare allowance income were deducted from their household consumption. Given the small number of families in receipt of childcare allowance, it is not surprising that childcare allowance income does not make a difference to average child poverty rates. 5.5. Key Findings of Survey by Child Needs Questionnaire For a more in-depth assessment of child poverty, the Statistical Committee with the support of the United Nations Children’s Fund (UNICEF) conducted a survey through the special module “Child Needs” among all households included in the ILCS sample within the period January 1 – December 31, 2017. The size of the sample was 7776 households. The questions in the module covered not only child needs, but also issues related to inclusive education, foste care of children, including those with mental and physical disability, enrollment of children with disability in regular schools, methods of upbringing children etc. 93 5.5.1. Child Needs Assessment of child needs is another way of measuring child poverty. It entails examining social and cultural profiles of poverty, which may affect the child's development even more than material deprivation. Among all children, most negative responses were received in relation to the question about attending a sports club or a similar center at least once a month – this need was unmet by 74% of children (86% of poor children and 87% of extremely poor children). The second in the list of unmet needs was the lack of at least one annual week-long vacation spent away from home, reported in relation to 71% of all children (84% of poor children and 91% of extremely poor children). The third, fourth and fifth unmet needs were reported to be the lack of newspapers, magazines or similar periodicals bought for the child – in relation to 68% of all children (78% of poor children and 90% of extremely poor children); the lack of invitations to friends for get-togethers at least twice a month – in relation to 65% of children (74% of poor children and 86% of extremely poor children); and the lack of receive invitations from friends for get-togethers at least twice a month – in relation to 62% of children (72% of poor children and 86% of extremely poor children). Poverty profile of this issue reveals a higher level of unmet needs by poor and extremely poor children compared to non-poor children. Table 5.20 illustrates the share of unmet needs of children, by poverty status. Table 5.20 – Armenia: Share of Unmet Needs in Households with Children Aged 6-18 Years, by Poverty Status, 2017 (percent) All Non-poor Poor Extremely Child Needs children children children poor children The child is not provided daily "pocket money" 50.3 45.1 62.2 87.7 The child does not have a suitable place for doing homework assignments and study 12.3 9.2 19.5 33.6 There is no safe place outside the house where the child can play 17.3 14.9 22.6 18.8 The child has no recreation items, such as a bicycle, games, etc. 33.6 27.2 48.4 73.9 The child has no items for hobbies 55.6 52.3 63.3 70.6 The child does not attend a sports club or a similar center at least once a month 74.1 69.1 85.7 86.8 The child does not participate in school trips and other events that cost money 23.0 18.8 32.6 67.9 The child does not have books that can be read for leisure 19.2 17.3 23.6 41.9 No newspapers, magazines or similar periodicals are bought for the child 67.7 63.0 78.4 89.8 The child does not spend at least one annual week- long vacation away from home 70.9 65.4 83.8 90.7 The child does not receive invitations from friends for get-togethers at least twice a month 61.9 57.4 72.2 86.0 The child does not invite friends for get-togethers at least twice a month 64.7 60.7 73.9 86.0 The child does not have the necessary school stationery 2.4 1.3 5.1 15.4 The child does not have shoes designed for different activities 16.8 12.2 27.4 71.3 Source: ILCS 2017 94 Table 5.21 provides the responses to the questions on unmet needs ("no" and "not available") of children aged 1-18 years, for different poverty levels. Among the total number of children, the most frequent response (67%) relates to the lack of visits to the dentist for checkup at least once a year, including 72% among poor children, and 90% among extremely poor children. The second unmet need is that the child cannot afford having meals with meat, chicken, fish (or vegetarian equivalent) at least once a day, as reported for 55% of the total number of children, including 70% of poor children and 94% of extremely poor children. Among extremely poor children, 90% did not visit the dentist for checkup at least once a year, 89% did not have new clothes, and 68% did not eat fresh fruits or vegetables once a day. 27% of children aged 3-18 years washed their teeth both in the morning and in the evening, 63% did so only once a day, and 11% did not wash their teeth every day. Table 5.21 – Armenia: Share of Unmet Needs Due to the Lack of Financial Resources in Households with Children Aged 1-18 Years, by Poverty Status, 2017 (percent) All Non-poor Poor Extremely Child Needs children children children poor children The child does not visit the dentist for checkup at least once a year 67.3 65.3 72.0 90.1 The child does not have some new (not second hand) clothes 32.9 24.8 51.1 88.5 The child does not eat fresh fruits or vegetables once a day 29.6 24.4 41.5 68.0 The child does not eat three times a day 10.2 7.9 15.3 33.2 The child does not have meals with meat, chicken, fish (or equivalent vegetarian food) at least once a day 55.2 48.6 70.2 93.8 The child does not celebrate special occasions (birthdays, religious events) 17.4 11.5 30.8 58.2 Source: ILCS 2017 5.5.2. Opinions Regarding Foster Care, Social Services and Inclusive Education Within the framework of the survey, members of households aged 18 years and above were asked to share their opinion on foster care and social services. Table 5.22 illustrates relevant findings of the survey. Population’s willingness to foster a child (become a foster parent) was very low at 5.9% only. Only 0.9% would agree to foster a child with mental disability even if it is a severe and profound one, and 9.9% – a child with mental disability if it is not a severe one (is moderate or mild). 1.0% would agree to foster a child with physical disability even if it is a severe and profound one, and 10.4% – a child with physical disability if it is not a severe one (is moderate or mild). Among household members who would never agree to foster the children specified above, only 3% responded that they would agree to provide caretaking for a child with disabilities if there were professional, supportive rehabilitation services in the community, and if compensation was provided above the established amount. 13% of adults found it acceptable if a socially vulnerable family places a child in a special school or orphanage due to social and/or economic hardships. 95 Among the respondents, 15% with reference to children with mental disability n and 7% with reference to children with physical disability considered placing the child in an orphanage as something acceptable. Then, among the respondents 40% with reference to children with mental disability and 29% with reference to children with physical disability found it acceptable to place the child in a special school. 44% and 69% of the respondents agreed that a child with, respectively, mental or physical disability should study in regular school. Then, 28% and 41% of the respondents agreed that a child with, respectively, mental or physical disability should study in the same class with their child. Table 5.22 – Armenia: Opinions of Household Members Aged 18-65 Years on Children with Mental and Physical Disability and on Other Issues, by Poverty Status, 2017 (percent) Opinion of Including members aged 18-65 years in Extremely Non-poor Poor surveyed poor households Agree to foster a child (become a foster parent) 5.9 6.3 4.4 7.2 Agree to foster a child with mental disability 0.9 0.9 0.9 0.6 (even if it is a severe and profound one) Agree to foster a child with mental disability if 9.9 9.1 11.2 31.5 it is not a severe one (is moderate or mild) Agree to foster a child with physical disability 1.0 1.0 1.0 0.0 (even if it is a severe and profound one) Agree to foster a child with physical disability 10.4 9.5 11.6 34.5 if it is not a severe one (is moderate or mild) Agree to foster a child with disability if there are professional, supportive rehabilitation services in the community, and if compensation 3.3 3.8 1.8 1.2 is provided above the established amount (responses by members who would never agree to foster a child) Find it acceptable if a socially vulnerable family places a child in a special school or orphanage 12.8 14.7 7.2 4.3 due to social and/or economic hardships Find it acceptable if a family places a child in an 14.6 16.6 8.9 4.7 orphanage due to the child’s mental disability Find it acceptable if a family places a child in an 7.4 8.4 4.5 3.9 orphanage due to the child’s physical disability Find it acceptable if a family places a child in a special school due to the child’s mental 40.2 42.8 32.1 36.8 disability Find it acceptable if a family places a child in a special school due to the child’s physical 28.6 30.8 21.6 29.6 disability Agree that a child with mental disability should 43.9 44.0 43.9 51.5 go to a regular school Agree that a child with physical disability 68.8 68.8 68.6 73.5 should go to a regular school Agree that a child with mental disability should 28.3 26.7 34.9 45.9 study in the same class with their child Agree that a child with physical disability 41.4 38.2 51.2 51.7 should study in the same class with their child Source: ILCS 2017 96 5.5.3. Opinion on and Experience with Healthcare Services Provided to Children under 18 Within the scope of the survey, household members aged 18 years and above were asked questions about healthcare services; according to the findings of the survey, 30% of all children visited/applied to a healthcare institution/individual during the last 3 months (25% and 26% of, respectively, poor and extremely poor children, and 33% of non-poor children). In relation to the question about whether the child was taken to a medical facility during the last year, the responses were as follows: one time – 26.2%, two times – 16.8%, three times – 7.9%, four times – 6.6%, and never – 42.5%. Where the child was never taken to a medical facility during the last year, the breakdown by poverty status was 40% for non-poor children, and 49% and 52%, respectively, among poor and extremely poor children. Whereas, both for all children and non-poor children, the majority of the parents had applied to a polyclinic during the recent illness of the child, in case of poor and extremely poor children the majority of parents had not applied anywhere or anyone. Parents had applied during the recent illness of the child for the treatment of the illness/ health problem in 54% of cases, for the prevention in 34% of cases, for both purposes in 9% of cases, and for other purposes in 3% of cases. 34% of parents were strongly satisfied with the medical services provided by the local medical facility/specialist, 61% – rather satisfied, 4% – rather dissatisfied, and 1% – strongly dissatisfied. Parents who were rather or strongly dissatisfied with the medical services specified the following reasons for dissatisfaction: insufficient knowledge/capacities of the specialists – 49%, expensive medical services – 29%, poor conditions in medical facilities – 14%, distance from medical facility / difficult access – 4 %; and other reasons. 67% of children received means/medicines prescribed by the specialist, 6% did not receive them, and 26% responded that there was no need for medicines and no remedies were prescribed. Where the child was never taken to a medical facility during the last year, the responses were as follows: there was no need, the child did not get ill – 54.7%; there was no need, the illness was not seriouse – 41%; medical services were expensive – 2%; and other reasons. 5.5.4. Opinions on Social Services Within the scope of the survey, household members aged 18-65 years were asked questions about social services. Household awareness about the activities of the territorial offices of social services in case of facing economic difficulties was rather high. In such situations, 78% of household members aged 18-65 years would apply to territorial offices. However, awareness about social workers (case managers), who can be contacted for help with family problems, was twice lower (45%). 42% of adult respondents were willing to cooperate with social workers or social case managers to address issues related to family and children. Respondents primarily expect the following types of support from social workers or social case managers: financial/ material (benefits, lump sum payments, charitable aid distribution) – 31%; socio- psychological/ rehabilitative, legal – 9%; both of the specified categories – 49%. 97 Whereas only 2.0% of adult respondents referred to cases run by a social worker or a social case manager in relation to their family (with the exception of financial/ material support), the level of satisfaction with their work was very high (69%). 5.5.5. Methods of Child Discipline Within the scope of the survey, adult household members (aged 18 and above) were asked questions about certain methods of child discipline they applied (Table 5.23). At that, the questions were asked on the upbringing methods of children within the age range of 2-14 years. Table 5.23 – Armenia: Opinions of Adult Household Members on Certain Methods of Child Discipline, by Poverty Status, 2017 (percent) Opinion of adult Including The adult household member has applied the members in particular method of child discipline within Extremely surveyed Non-poor Poor 30 days prior to the survey poor households Offer motivation for good behavior such as praise, 88.7 91.2 83.0 73.0 presents, a favorite activity or entertainment Explain on any occasion why the child’s behavior was wrong and try to occupy him/her with 94.7 95.2 94.0 86.7 something different Take away the child’s privileges or favorite activities, or not allow him/her to leave the house 57.4 57.1 59.0 41.8 for a certain period of time Shout or scream on the child 62.7 62.7 64.1 43.1 Scold the child, call bad names such as stupid, 40.0 39.8 41.4 31.2 lazy, or other names Slap or hit the child’s backside or other body 22.6 22.0 24.6 15.4 parts by hand Slap or hit the child backside or other body parts 1.1 1.0 1.0 4.9 with a belt, stick or other instrument Beat the child constantly hitting on the face, 0.7 0.7 0.7 2.0 head, years, legs, hands or arms Source: ILCS 2017 5.5.6. Participation of Children (5-17 Years) in Ecological Activities 42% of the adult members of households with children responded that their children never took part in ecological activities (such as tree planting, ecological campaigns, knowledge dissemination, raising public awareness, community clean-up activities, bird-watching, etc.). 53% responded that their children took part in such activities once or twice a year, and 4% – three or four times a year. 0.6% of the children participated in such activities every month, and 0.4% – every week. 5.5.7. Disaster Experience Over the last year, 11.1% of the respondents aged 18-65 years incurred disaster-caused damage related to health and livelihood such as loss of crops, livestock, essential and vital assets/ property etc. Among them, 86.1% suffered from disasters caused by extreme weather conditions or climate change, 3.3% – from disasters caused by other natural or anthropogenic phenomena. 1.1% reported to have suffered from disastrous consequences of internal clashes, wars and other conflict situations; and 9.5% – from other disasters. Households with children also suffered damage caused by various disasters. 98 Table 5.24 – Armenia: Disaster Experience of Household Members Aged 18-65 Years, by Poverty Status, 2017 (percent) Disaster-caused Including losses among Extremely Non-poor Poor population poor Over the past year, the household incurred disaster-caused damage related to health and livelihood, such as loss of 11.1 11.6 9.2 8.4 crops, livestock, essential and vital assets/ property etc. Disaster types Disasters caused by extreme weather 86.1 87.0 82.2 100 conditions or climate change Disasters caused by other natural and 3.3 7.3 3.4 0.0 anthropogenic phenomena Disastrous consequences of internal clashes, wars and other conflict 1.1 1.1 1.1 0.0 situations Other 9.5 9.3 9.5 0.0 Source: ILCS 2017 5.5.8. Early Development of Children under 5 Years 5.5.8.1. Relevant questions were responded by the child's mother or primary caregiver, i.e. the person who was mainly engaged in the child's care. Table 5.25 – Armenia: Early Development of Children under 5 Years, by Poverty Status, 2017 (percent) Non-poor Extremely All children Poor children children poor children Received the state certificate of 94.9 95.7 92.8 98.1 child’s health Received the child’s health 90.7 91.4 88.8 92.8 passport Used the child’s health passport 90.8 91.5 89.1 91.3 Source: ILCS 2017 The state health certificates were received by 95% of all children and more often (98%) by extremely poor children. Health passports were received by 91% of all children, the largest share of recipients was the children from extremely poor families (93%). The health passports were used by 91% of children, from which more often by children from non-poor households (92%). 99 5.5.8.2. Exclusive Breastfeeding of Children up to 6 Months of Age Breast milk is the best food for infants. Exclusive breastfeeding is the unique source of food or liquid necessary for them. Exclusive breastfeeding is recommended until the infant reaches the age of 6 months, because this secures the necessary nutrition and prevents potential influence of pathogenic bacteria. Mothers of children below 5 years were asked the question whether they had exclusively breastfed (excluding any additional food or liquid, even water) the child until the age of 6 months. As one can see in Table 5.26, exclusive breastfeeding was practiced by 52% of mothers. In non-poor and poor households, exclusive breastfeeding was practiced by, respectively, 50% and 58% of mothers; whereas in extremely poor households this indicator was lower at 31%. Table 5.26 – Armenia: Share of Households with Children under 5 Years Exclusively Breastfed up to 6 Months of Age, by Poverty Status, 2017 (percent) Children in All children Children in non- Children in poor extremely poor under 5 years poor households households households Share of children under 5 years exclusively breastfed (excluding any 51.8 50.0 57.7 31.2 additional food or liquids, even water) up to 6 months of age At what age did you give/are going to give additional food to your child? 0 to 6 months 37.8 39.4 32.8 54.1 6 to 12 months 60.0 58.5 64.5 43.4 12 to 24 months 2.2 1.9 2.7 2.5 24 months and above - - - - Source: ILCS 2017 5.5.8.3. Development of Children under 5 Years (availability of books and toys) 66.4% of children under 5 years have a book/picture book at home. 30% of children in non-poor households have no books, and the share of such children in extremely poor households is 1.5 times higher. The majority of children (93%) play with toys from a shop or manufactured toys, while 29% of children play with home-made toys such as dolls, cars etc. 100 Table 5.27 – Armenia: Development of Children under 5 Years, by Poverty Status, 2017 (percent) All children Children in Children in Children in under 5 non-poor poor extremely poor years households households households How many children’s books or picture books does the child have? None 33.6 30.0 41.2 45.9 1-9 59.9 62.6 54.0 52.0 10 and more 6.5 7.4 4.8 2.1 The child plays with home-made toys, such as dolls, cars etc. Yes 29.2 29.8 28.3 21.1 No 67.9 66.6 70.3 75.5 Difficult to answer 3.0 3.6 1.4 3.4 The child plays with toys from a shop or manufactured toys Yes 93.1 93.5 93.1 81.3 No 5.9 5.2 6.5 18.7 Difficult to answer 1.0 1.3 0.4 0.0 The child plays with Household objects, such as bowls or pots, or objects found outside, such as sticks, rocks, animal shells or leaves Yes 58.2 59.1 57.9 34.4 No 38.8 37.8 39.3 61.1 Difficult to answer 3.0 3.1 2.7 4.5 Source: ILCS 2017 5.5.9. Early Childhood Development of Children Aged 3 to 6 Years Children aged 3 to 6 years develop and learn with different intensity. The following questions reflect on some aspects of child development: Table 5.28 – Armenia: Early Childhood Development among 3 to 6 Years Old Children, 2017 (percent) The child recognizes or can name at least 10 letters of the alphabet 48.9 The child can read at least four simple, popular words 29.5 The child knows the names of the numbers 1 through 10 and recognizes their symbols 75.0 The child can raise a small object, such as a stick or a stone, from the ground with two 97.9 fingers Sometimes the child is too sick to play 26.9 The child follows clear instructions on how to do something correctly 95.2 When the child is told to do something, he/ she can do that independently 88.6 The child gets along well with other children 94.0 The child kicks, bites, or strikes other children or adults 17.7 The child gets distructed easiliy 14.3 The child has ever attended the following early childhood education institutions: Kindergarten 52.3 Pre-school (school based preparatory class) 5.6 Community based child development center 2.2 Educational center (college) 2.7 The child has attended these early childhood education institutions at any time scince 42.6 September The child currently attends these early childhood education institutions 49.1 Source: ILCS 2017 101 5.6. National Assessment of Multidimensional Child Poverty This subsection represents the national assessment of multidimensional child poverty in Armenia. The study is based on the Multiple Overlapping Deprivation Analysis (MODA) methodology developed by the UNICEF. For the purposes of the study, findings of the 2013 and 2014 Integrated Living Conditions Survey, as well as of the Child Needs Survey conducted between July 1, 2013 – June 30, 2014 were used. The Statistical Committee has estimated multidimensional child poverty in 2017 using the MODA methodology based on the findings of ILCS 2017and Child Needs Survey. The study measures deprivation in number of dimensions (Table 5.29). Selection of the dimensions has been made through a broad consultative process with national and development partners under the guiding principles of the Convention on the Rights of the Child. The methodology uses a life-cycle approach breaking up the analysis into three age groups (0-5, 6-14, 15-17). In addition, MODA has the following key features:  The child is the unit of analysis rather than the household, sincechild poverty is significantly different from adult poverty;  It applies a whole-child oriented approach;  It measures monetary poverty and multidimensional deprivation simultaneously;  And it enriches knowledge through overlapping deprivation analysis and defining description of the geographical and socio-economic characteristics of the (multidimensionally) deprived children, thereby pointing out mechanisms for effective policy design. Table 5.29 – Armenia: Poverty Dimensions and Indicators 0-5 6-14 15-17 Poverty dimension Indicator years years years Exclusive breastfeeding until at least 6 Nutrition month old1 X Early childhood education ECEC attendance (3-5 year-olds)2 X and care (ECEC) Place to do homework X Education Stationary necessary for school X Not in employment or education (NEET) X Space to play outside X X Leisure Recreation items (toys, bicycle) X Books X Social interactions Friends X X Clothing Shoes X X No computer at home X X Information No internet at home X X No access to a computer X No access to the internet X Water (protected sources less than 8 hours per day or 20 days a month) X X X Utilities Heating (none or wood) X X X Overcrowding X X X Housing Housing problems X X X Notes: (1) Asked retrospective for all children aged 0-5 years; (2) This is defined only for children aged 3-5 years old; children aged 0-3 years are counted as not deprived. Source: ILCS 2013/2014-2017 102 Graph 5.1 – Armenia: Deprivation, by Dimension and Graph 5.2 – Armenia: Deprivation, by Dimension Area, 2013/2014 and Area, 2015 (Percent) (Percent) 100 95.2 100 90 90 86.8 80 80 70 70 54.9 56.7 60 60 51.2 52.8 50.3 46.3 47 49.3 50.7 50 45.3 50 51.8 44.6 27.1 43.4 48.7 47.6 39.2 43.5 40 43.1 40 35.8 35.3 35.6 41.2 32 29.734.9 39.4 34.7 28.4 30 28.6 37.6 25.2 27.7 30 30.2 30.2 28.2 29.3 24.9 20 19.6 23.3 21.1 20 15.3 20.4 29.4 16.2 5.9 20 14.8 10 23.3 10 10 8.4 7.4 0 0 Urban Rural National Urban Rural National Graph 5.3 – Armenia: Deprivation, by Dimension Graph 5.4 – Armenia: Deprivation, by Dimension and and Area, 2016, (Percent) Area, 2017, (Percent) 100 100 90 89.7 90 90 80 80 70 70 60 60 51.1 48.9 51.148.5 50 40.9 48.5 50 40.9 48.9 40.3 36.7 40.3 38.5 40 36.8 40 36.8 49.4 41.7 33.1 29 33 47.1 41.8 27.1 29 33.1 33 30 Urban 30 28 Urban 21.5 23.4 23.4 21.5 23.4 17.6 20 16.9 16.9 13.9 20 16.9 16.9 13.9 8.6 10 17.1 Rural 8.6 27.9 10 17.1 9.3 26.7 9.3 Rural 10 15.3 Nation 10 10.2 9.6 7.6 0 0 Source: ILCS 2013/2014, 2015, 2016, 2017 Both in 2013/2014 and 2015-2017 most children in Armenia were deprived in utilities. In 2017, the deprivation levels compared to 2013/2014 decreased in all dimensions except for utility (51.1% and 50.7%) and housing (48.9% and 48.7%) services, which remained at the same level with insignificant changes. Deprivation in nutrition, education and social dimensions was particularly deep. Urban/ rural differences in 2017 were particularly significant in terms of utility services, followed by differences in clothing, social and early childhood education and care dimensions. According to 2017 data, children deprived in two or more dimensions primarily live in rural areas, have more siblings, their household heads work in the agriculture and have low educational level. 103 Graph 5.5 – Armenia: Children Deprived in Multiple Dimensions Deprived in 2 and more dimensions 35 30 28.3 28 61.6% 25 20 18.6 15 10.1 9.1 10 4.6 5 1.2 0.1 0 Deprived Deprived Deprived Deprived Deprived Deprived Deprived Deprived in 0ILCS 2017 Source: in 1 in 2 in 3 in 4 in 5 in 6 in 7 National Urban Rural Table 5.30 – Armenia: Child Deprivation, 2013/2014-2017 (percent) National Urban Rural 2013/2014 63.7 52.5 81.7 2015 64.5 54.1 80.0 2016 57.4 50.8 68.7 2017 61.6 52.0 74.9 Source: ILCS 2013/2014-2017 According to 2017 data, 61.6% of children in Armenia are deprived in 2 or more dimensions (compared to 64% in 2013/2014). The share of deprived children is 75% in rural areas (82% in 2013-2014) and 52% in urban areas (53% in 2013-2014). Thus, in 2017 the gap between urban and rural communities in terms of multidimensional child deprivation has been mitigated. Table 5.31 – Armenia: Deprivation (2+) and Monetary Poverty Overlap, 2017 (percent) National Urban Rural Poor and deprived 23.3 20.1 27.9 Deprived only 38.2 31.9 47.1 Poor only 7.3 9.6 4.0 Neither poor nor deprived 31.2 38.4 21.0 Source: ILCS 2017 104 Graph 5.6 – Armenia: Deprived and/or Poor Children, 2017 There is a significant overlap in monetary poverty and deprivation. For a cut-off of two or more dimensions, 23.3% of children deprived were both poor and deprived. It is noteworthy that 38.2% of children are deprived, even though they do not live in poor households. These are children who were most likely left out of interventions aimed at overcoming monetary poverty and need specific targeted programs. 105