The FINANCIAL — Ever since 2002, the National Statistical Office (NSO) and the World Bank have engaged in extensive co-operation involving building capacity of the statistical staff on developing a methodology for Household Income Expenditure and Living Standards Surveys and poverty measurement. An example of this long standing cooperation is the development of a credible methodology that can accurately demonstrate changes in the livelihoods of the Mongolian population, jointly estimating their outcomes and putting a stop to disagreements over poverty estimates in Mongolia.
On July 1, the National Statistical Office of Mongolia and the World Bank jointly announce the poverty estimates for 2014. The estimates are obtained from the Household Socio-Economic Survey (HSES) 2014 using an international standard poverty methodology which has been validated by the World Bank, including a peer review by international poverty experts.
“The poverty estimates are based on a well-vetted methodology that meets international standards, following extensive cooperation between the NSO and the World Bank to improve the methodology for poverty measurement. The poverty rate declined fastest in rural areas and was driven by continued growth in livestock incomes,” said Mr. S. Mendsaikhan, the Chairman of the National Statistical Office.
The results show that the poverty rate declined from 27.4 percent in 2012 to 21.6 percent in 2014. The poverty depth was 5.2 and the poverty severity index was 1.9. The reduction in poverty by 5.8 percentage points in two years is a significant achievement even by most international standards, but it also attests to a slowdown in the pace of poverty reduction between 2012 and 2014, when compared to the 2010-2012 period when poverty declined by more than 11 percentage points, according to the World Bank.
One of the goals of the World Bank Group is to end extreme poverty and we are glad to see that Mongolia is making progress, reducing the poverty rate to 21.6 percent. We are very encouraged that the pace of poverty reduction in Mongolia remains high by international standards. At the same time, the fact that one in five people lives in poverty serves as a reminder that many people are still vulnerable” said James Anderson, Country Representative of the World Bank to Mongolia.
In interpreting these results, it is important to note that estimates from the HSES 2014 are a reflection of standards of living in 2014 and therefore do not capture developments since the beginning of 2015. Also, poverty is being compared to 2012 and years before. After 2012, the economy grew by 11.6 percent in 2013 and even though growth later slowed down, the economy still grew by 7.8 percent in 2014. So the economy grew by 20 percent between 2012 and 2014. Agriculture, in particular, grew by 19.2 percent and 14.5 percent in 2013 and 2014, respectively, representing a 36 percent increase in economic activity in the sector over the two years. This was faster than all non-mining sectors other than financial services and insurance.
Poverty declined fastest in rural areas, where it went down by 9 percentage points and accounted for more than half the reduction in poverty between 2012 and 2014, despite the rural share of the population being smaller. This reduction in poverty was driven by continued growth in livestock incomes. The Highlands region, which was both the largest producer of livestock and recipient of government funds under the livestock incentives scheme, contributed to 44 percent of the reduction in poverty in Mongolia.
Poverty reduction was slower in urban areas, especially in Ulaanbaatar where poverty declined by 3 percent during 2012-14 compared to 11 percent between 2010 and 2012. Pensions, real wages and non-farm employment were the major contributors to poverty reduction between 2012 and 2014. Even though real wages and pensions did not increase in 2014, their increase in 2013 ensured that they remained higher than in 2012. However, their stagnation in 2014 contributed to the slowdown in poverty reduction in urban areas, which meant poverty in Mongolia as a whole declined at a slower rate than in previous periods.
A considerable number of the poor in Mongolia were below but very close to the poverty line in 2012. This meant that even moderate growth could push them out of poverty. But moderate gains also mean that most of those who escaped poverty are not too far above the poverty line and, therefore, remain vulnerable. Thus, as poverty continues to decline, a larger number of people are now in a vulnerable position where negative economic shocks could reverse their gains and push them back into poverty.