Various forecasts suggest that years worth of poverty reduction are slowly being negated by COVID-19.
Forecasts from multiple organisations show that the COVID-19 pandemic is expected to push millions of people into poverty.
According to the World Bank’s forecast, about 49 million people will be brought into extreme poverty in 2020. Another projection from the United Nations World Institute for Development Economics Research (UNU-WIDER) expands this bracket to 420 million to 580 million people. Meanwhile, Oxfam researchers predict the figure to be a staggering 547.6 million.
Regardless of which figure will reflect the reality in the future, it is clear that the impact of the global pandemic will be serious for low-income households.
World Bank’s online poverty estimation tool Povcal shows the global poverty rate six years prior to 2020. As we can see in the chart above, the world has experienced a trend of decline in the rate of poverty. However, by the end of 2020, the impact of COVID-19 is expected to negate this reduction.
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Based on the estimates of the World Bank, COVID-19 can potentially revert poverty conditions to how they were back in 2018.
The International Monetary Fund (IMF) projections go even further. It suggests that the progress in poverty reduction since the launch of the Sustainable Development Goals (SDGs) in September 2015 can be fully reversed by COVID-19.
It is important to mention that this is not only the first time in the recent decade but the first time in the current century that the number of people in poverty in the world will increase. This is a clear demonstration of the impact of the ongoing pandemic.
The great reversal
A phenomenon dubbed by some media outlets as the great reversal, it is apparent that governments cannot remain complacent in their efforts to curb poverty amid this global crisis, especially with people receiving lower incomes, losing their jobs, and getting sick.
According to The Economist, 181 countries have already announced efforts to protect those below the poverty line, mostly in the form of financial or food assistance. While this may be the case, they have also noted that much of the cash in these welfare schemes can be found in rich countries.
The reason behind this is that some developing countries simply do not have sufficient funding for these programs. There is a need for external assistance, which the United Nations estimates will reach about USD 2.5 trillion in total.
There is also a change in the location of the new poor. Instead of rural areas, a huge chunk of those falling into poverty is now located in urban areas. Apart from boosting fiscal resources specifically for developing countries, the World Bank proposes the creation of safety net programs which will address this distributional shift.
The consequences of the COVID-19 pandemic are undeniably drastic. Unfortunately, they are also trickling down quickly, especially in vulnerable sectors. World leaders have to act fast if we do not want our progress to backtrack further than it already has.