The economic consequences of the coronavirus pandemic will change the profile of global poverty by creating millions of “new poor” who are relatively well-educated in urban areas of middle-income countries, the World Bank has warned.
Overall, the pandemic will push between 88m and 115m people into extreme poverty this year, which the bank defines as living on less than $1.90 a day, according to a report it published on Wednesday.
According to the report, more than 80 per cent of those who will fall into extreme poverty this year are in middle-income countries, with south Asia the worst-hit region, followed by sub-Saharan Africa.
Many of these economies have benefited greatly from global economic growth over the past two or three decades, carrying swaths of their populations out of poverty; the pandemic threatens to reverse some of that progress.
“We are likely to see people who previously escaped poverty falling back into it, as well as people who have never been poor falling into poverty for the first time,” said Carolina Sánchez-Páramo, director of the bank’s poverty and equity division.
Covid-19 and its associated economic crisis, compounded by the effects of armed conflict and climate change, will lead to the first increase in global poverty since 1998, ending more than two decades of continuous progress, according to the report.
“Even under the optimistic assumption that, after 2021, growth returns to its historical rates . . . the pandemic’s impoverishing effects will be vast,” the World Bank said.
The global economy is expected to contract by between 5 and 8 per cent this year on a per-capita basis, and that would set poverty levels back to their 2017 levels, undoing three years of progress in improving living standards, the World Bank estimated.
“In order to reverse this serious setback to development progress and poverty reduction, countries will need to prepare for a different economy post-Covid, by allowing capital, labour, skills and innovation to move into new businesses and sectors,” said David Malpass, president of the World Bank Group.
Ms Sánchez-Páramo said the pandemic had been primarily an urban phenomenon in its early stages, with lockdown curbs causing significant losses in employment and income among urban workers. It would take time for social support policies designed for rural areas in which poverty had traditionally been more prevalent to reach these new groups of urban poor, she added.
Progress in reducing poverty had been slowing before the pandemic, according to the report. About 52m people worldwide rose out of poverty between 2015 and 2017 but the rate of poverty reduction had slowed to less than half a percentage point a year during that period, after reductions of about 1 per cent a year between 1990 and 2015.
Nearly 7 per cent of the world’s population will live on less than $1.90 a day by 2030, the report said, compared with a target of less than 3 per cent under the UN’s Sustainable Development Goals.
*= This article has been amended since initial publication to correct the last year of the increase in global poverty
Source: Economy - ft.com
