bne:Chart - Russia begins to steady the ship according to latest Despair Index

By bne IntelliNews November 6, 2015

Henry Kirby in London -

Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady score increases.

bne IntelliNews' Despair Index measures the relative prosperity of various countries by combinating inflation, unemployment and poverty – the lower the score, the better the living conditions for the population. In the index's latest release, Ukraine’s score fell to 70.6 in October from 77.2 in May – a significant drop and its first decrease since 2012. However, its year-to-date change in score made it the worst performing of all the countries measured, with a January-October score increase of 24.1.

While Russia’s score increase of 0.4 points to 36.9 marked a worsening in its Despair Index, it marked a pronounced slowdown in what had been a rapid deterioration since the beginning of 2013.

An increase in the number of people living below the national poverty line was the driving factor behind Russia’s worsening score. Between June and October, the poverty rate increased from 14.2% to 15.9%.

Were it not for the increase in Russia’s poverty rate, its Despair Index score would actually have improved, with inflation slowing and unemployment decreasing since the Despair Index was last measured in May 2015.

The improvement in Ukraine’s score can be ascribed to a 6.5-percentage-point fall in inflation between May and September this year. However, up-to-date and accurate poverty figures for the country have not been measured since the conflict in the Donbas region began in 2014.

According to the United Nations Development Programme (UNDP), Ukraine’s poverty rate could increase to 32% in 2015, which would bring its current Despair Index score up to a massive 93.5. The UNDP explained that, “sudden poverty due to the loss of property and livelihoods as a result of the armed conflict in Donbas constitutes a new source of vulnerability in Ukraine.”

CEE/CIS top of the pile

Of all the countries measured in the Despair Index – Central and Eastern Europe and the Commonwealth of Independent States (CEE/CIS), BRICS, EU and the US – seven of the top 10 countries came from CEE/CIS region. It should be noted, though, that Kazakhstan (1st), China (2nd), Azerbaijan (3rd) and Belarus’ (5th) publish figures on unemployment and poverty that need to be taken with a pinch of salt, and may be artificially improving their scores.

4th best in the index was the Czech Republic, with a score of 15. While its unemployment rate is slightly worse than that of its Western European counterparts, its poverty rate of 8.6% is close to half that of the US (15%), Germany (16.1%) and the UK (15.9%), contributing heavily to its impressive score.

The most improved country from January of this year to October was Kyrgyzstan, with a score decrease of 5.9 points. This was due to a fall in its inflation figure, from 11.6% in January to 6.4% in September.

The sharp depreciation of the Kyrgyz som in the import-heavy Kyrgyzstan at the beginning on 2015 was the main factor behind the better inflation. The Kyrgyz National Bank’s several rate changes since have successfully driven the rate of inflation down to today’s level.

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