The economic recession in Europe and central Asia threatens
to wipe out much of a decades worth of poverty reduction,
international institutions have warned.
The crisis will push back into poverty and
vulnerability almost 35 million people about one
third of the number that have escaped from it over the last ten
years, a World Bank report warned last month.
Ben Slay, senior economist (Europe and CIS) at the United
Nations Development Programme (UNDP), told Emerging Markets:
What is specific about the Europe and central Asia region
is that many, many people have been lifted out of poverty in
the last decade by economic growth rather than, say,
changes in economic structure or by welfare programmes
and, without that growth, they will fall back.
In this respect the region is more vulnerable in this
economic crisis than regions such as Asia and Africa that are
The World Bank expects that the number of poor and
vulnerable people in the region will rise by 5 million for
every 1% decline in GDP which suggests, according to
Bank economists, that by the end of 2009 almost 25 million more
people will be poor and vulnerable, and by the end of 2010 a
further 10 million.
Of the regions 480 million people, 192 million are
considered poor or vulnerable by the Bank, and nearly 90
million have moved out of poverty and vulnerability since 1999.
The reversal of the trend is a human crisis that is going
largely unnoticed, Shigeo Katsu, the World Banks
president for Europe and Central Asia, said in Washington late
Slay at the UNDP said the Banks figures were based on
the most thorough research available, but added that, if
anything, the numbers are optimistic.
He said that former communist countries are often
distinguished by spending a fair proportion of GDP
higher than most African and Asian countries on social
protection but that the systems are very
inefficient and often dont necessarily provide support to
the right people. These need to be reorganised.
Slay said that in Bosnia, for example, while aid is targeted
to war veterans, child poverty is not dealt with. The crisis
begs the question: Is it time to renegotiate the social
Another challenge, Slay argued, is to envisage a new growth
model for the region as it begins to recover.
It is an open question as to whether foreign investors
will come in again, and foreign lenders will lend again, as
they did in the 2000s. Countries in the region will need to
consider how to move away from current account deficits of 15%
Erik Berglof, chief economist at the EBRD, said that the
Banks work went alongside poverty reduction work insofar
as private sector development and [...] bringing [the
poor] into productive work to mitigate the impact of the