Tuesday 7 February 2023

Economists Warn of High Growth in Rural Poverty in Recent Months

As of May 2022, rural poverty would reach 34.8% of households (158,146), with extreme poverty of 12.4% (56,388).

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7 February 2023 - At The Banks - BCCR

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QCOSTARICA – In order to approximate the impact that inflation as of May 2022 has on poverty and extreme poverty, the Colegio de Ciencias Económicas  (College of Economic Sciences) has taken on the task of making estimates based on official INEC (National Institute of Statistics and Census of Costa Rica) data.

For this, the variation in the general price index to May, the loss of purchasing power of households and the poverty and extreme poverty lines for May 2022 have been taken into account, under the assumption that household income remained constant.

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This means that if the conditions of employment or remuneration for the vulnerable population improved, the impact would be less than estimated and vice versa. To know the definitive data, we will have to wait for the publication of the Encuesta Nacional de Hogares (ENAHO) – National Household Survey – expected in August.

But, given the seriousness of the situation that a growing number of households are going through, the College has wanted to advance these estimates and reiterate its call for immediate action.

According to their estimates, 29.05% of households would be in poverty (484,078), while the percentage of households in extreme poverty would reach 8.98% (149,699).

Ennio Rodríguez, President of the College, pointed out that “the impact that the accumulated inflation to May would be having on poverty poses a worrying panorama and a challenge that cannot be postponed for the government. Especially critical is the increase in extreme poverty, which reached practically 9.0%. But we want to highlight the greater impact of poverty in rural areas (12.4% of households would be in extreme poverty).

“This situation is explained by the territorial asymmetries of low productive development, low productivity levels and acute unemployment problems, which have historically affected rural areas, where poverty and inequality exceed national averages”.

“It is urgent that the government implement a series of measures to counteract the impact that price inflation would be causing on poverty levels, says Rodríguez, and recommended the following measures:

  1. Increase monetary transfers aimed at households in extreme poverty, which offset the increase in the cost of the basic food basket.
  2. Consider subsidizing some services or goods that trickle down to higher income quintiles less, such as public transportation.
  3. Design programs and precise policies to combat poverty in rural and urban areas, based on the poverty clusters that have been identified. These programs must consider in their design and implementation the differentiated characteristics of poverty in urban territories with respect to those of rural territories. In particular, an employment policy should be focused on that provides qualification options, particularly for women heads of household, and support for their entrepreneurship.
  4. Manage cooperation resources and international assistance to support households that are in a condition of poverty and vulnerability. The priority in the management and use of these resources should be focused on reducing extreme poverty, both urban and rural.
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