The level of poverty in Belarus fell from 39 percent of the country's population in 1996 to 27 percent in 2002 and 18 percent in 2004. About two million people have moved out of poverty. These findings come from the recently published World Bank report for 2005, "Growth, Poverty and Inequality in Eastern Europe and the Former Soviet Union."
Its authors take $2.15 per day as absolute poverty, considering costs that are needed in cold climate for heating, housing utilities and warm clothing. Post-socialist countries have been rather successful in coping with poverty. Belarus is not an exception in this process. There is nothing surprising about it: there is nothing in economic theory that would predetermine the growth of poverty in an authoritarian and non-free economy.
Belarus is waging no war against external enemies. Civil war and terror attacks are not the case with the country, either. There are no floods, earthquakes and other natural disasters. Consequently, capital and production assets are not destroyed.
A country whose GDP is more than $23 billion, or about $70 billion in terms of purchasing power parity, which gets substantial energy rent and distributes more than $12 billion through public budget in favorable external market conditions, is destined to grow. Economic growth comes mostly from 100 to 150 enterprises that still remain competitive in the region.
In addition, Belarus has 34 categories of social security beneficiaries. They get 77 types of benefits and at least 43 types of subsidies. More than 80 percent of the population has access to some type of social security allowance. A vast system of resource re-distribution is in place. The Belarusian rich earn on both the process of distribution and on government transfers. Luckily, the poor also get something along the way.
The country has a rather good infrastructure: roads, running water facilities, electricity networks, sewage, gas supply and telephone. A developed network of healthcare and educational institutions make the infrastructure even better. Belarus has all the preconditions to have no more than five percent of the poor. And they would have at least $3-4 per day.
Given all those factors, one can predict a further decrease in the number of the poor, especially if the Belarusian government gives an adequate reaction to the challenge of ensuring sustainable economic growth.
According to the WB report, the level of poverty in Belarus fell from 39 percent of the country's population in 1996 to 27 percent in 2002 and 18 percent in 2004. About two million people have stepped back from the poverty line. Russia shows similar progress. Its share of the poor shrank from 42 percent in 1999 to 20 percent in 2002. The number of the poor in Poland is 15 percent.
While analyzing the situation in Belarus, the WB warns that "the poverty reduction in Belarus is impressive but vulnerable because Belarus' significant comparative advantages at its main export markets, the main source of its impressive growth, are eroding quickly."
The reduction in the number of the poor is partially a result of re-distributing a large share of GDP in favor of low-income groups, as well as of the government's policy to keep utility prices much below the level of production costs of respective services. This is good for households in the short term, but the other side of the coin also has to be taken into account, and namely, the situation of the producer. A company can operate with costs constantly exceeding incomes only with the help of continuous public budget subsidies, low prices for imported energy and decreasing quality of services they provide.
The housing maintenance sector is experiencing a chronic lack of resources. The lack of investment blocks the modernization of main assets and creates a threat to the stable production of quality services in the future. Sooner or later Belarus will have to introduce prices that would cover 100 percent of production costs plus include an investment component. This alone can make water, gas, electricity, sewage and garbage collection commercially attractive sectors. This alone can ensure that pipes are in good repair, hot water is supplied all year round and boiler facilities stop wasting heat.
Housing maintenance spending of households rose significantly between 1998 and 2003. Households in Poland, Bulgaria, Lithuania and Estonia spend 19.7, 18.3, 14.9 and 16 percent, respectively, on housing utilities. Central and Eastern European countries that already joined the EU or are preparing for the accession in two years see their housing sectors commercializing very quickly. CIS countries are obviously lagging behind in that respect.
Belarusian households get more assistance than others from the government. They spend just 6 percent of their incomes on utilities. For comparison: 8 percent in Russia and 9.9 percent in Ukraine. The Belarusian authorities have frozen housing sector reform, although public budget has sufficient resources for such reform. It would be much more difficult and painful to raise prices when public budget is tight and business activity is low. The future reform is going to be a serious one. If prices for Russian energy go up and housing sector remains in the hands of the state, the threat of poverty growth may hit Belarus.
The structure of consumption in Belarus shows that people continue to spend too much on food and drinks (68.1 percent). The respective figure is higher only in Ukraine (72.2 percent) and Armenia (72.3 percent). The WB report points to the low efficiency of healthcare in Belarus, even though the availability of hospitals and doctors is good. Another alarming fact is that the country has one of the worst indicators as to the average life expectancy for men - 62 years. According to the report, if the current poverty and economic growth trends persist, countries in the region will continue to reduce poverty by seven percent per year. As many as 21 million people will move out of poverty by 2007. About 40 million people, or 8.9 percent, will still live in poverty, while 108.8 million will be vulnerable to poverty. However, if economic recession starts, the indicators can get substantially worse. This fully applies to Belarus.
The World Bank traditionally recommends focusing on structural reforms, integrating rural areas into economic processes, supporting labor market reforms and expanding access to credit resources, trade and services. More market, openness and favorable business conditions are needed for successful fight against poverty.