Managing Expenditure Pressures for Sustainability and Growth
Figure 2.1. Social Protection Spending in Georgia and Region
Social protection spending in Georgia is relatively low by international standards, although it is somewhat closer to the norm among countries at similar income levels. Social assistance spending, at about 1 percent of GDP, is typical of the region. Pension spending in Georgia is lower than average, but most of the higher spenders are also richer countries, many of which are saddled with unsustainable pension obligations. Unlike most other countries, Georgia does not have labor market programs (e.g., unemployment insurance), although it also has a large rural sector. Georgia is a clear outlier in terms of health spending (not shown, but discussed in the next chapter), which at less than 2 percent of GDP is about half the regional average and also low by global standards.
in percent of GDP
Tajikistan 09 Kosovo 09 Azerbaijan 09 Georgia 09 Armenia 09 Kyrgyz Republic 09 Albania 09 Turkey 09 Latvia 09 Russia 08 Moldova 08 FYR Macedonia 09 Lithuania 08 Bulgaria 08 Belarus 09 BiH 07 Montenegro 09 Romania 09 Croatia 09 Serbia 09 Ukraine 09
0 Social assistance
Source: ECA SP database.
5
10
15
Labor market
20
25
Social insurance
Social safety net programs have contributed to poverty reduction in Georgia. Since 2004, Georgia has established a viable social safety net by clearing pension arrears, increasing benefits, and by putting in place the targeted social assistance and medical insurance programs. Strong growth during 2004–07 was not associated with lower unemployment due to significant economic restructuring. Still, comparisons based on the annual national Household Budget Survey (HBS) suggest a reduction in the poverty headcount during this period, from 28.5 percent in 2003 to 22.7 percent in 2008 (figure 2.2). The decline in poverty is partly due to the social safety net programs put in place during this period, as indicated by survey-based simulations discussed in greater detail below. Following the economic crisis, poverty rose to 24.7 percent in 2009 (18.4 percent in urban areas and 30.7 percent in rural areas). Inequality also followed a similar pattern, with the Gini coefficient declining from 38.0 in 2003 to 33.8 in 2008, before rising to 34.1 in 2009. Figure 2.2. Poverty Trends in Georgia, 2003–09 in percent of population
in percent of population
Overall poverty
Extreme poverty 14
30
28.5
12
25
12.9
24.7 23.4
22.7
10
20 9.2
8.7
8 15
7.3 6
10 4 5
2 0
0 2003
2007
2008
2009
2003
2007
2008
2009
Source: Estimates based on 2007 LSMS, 2003 HBS, and 2008-09 HBS.
|
21
Chapter 2. Social Protection Expenditures