In Depth

How coronavirus set back the global fight against extreme poverty

Pandemic is reversing two decades of progress in raising living standards

The coronavirus pandemic threatens to upend 20 years of progress in the campaign to tackle extreme poverty across the globe, according to a study by the World Bank.

The economic impact of Covid-19 is expected “to push an additional 88 million to 115 million people into extreme poverty this year, with the total rising to as many as 150 million by 2021”, the new report says.

The estimate is a sharp increase on the Bank’s previous projection in May that the impacts of the virus would force around 60 million people into extreme poverty in 2020.

What was the trajectory before Covid?

Until the coronavirus pandemic struck, global poverty had been declining for more than two decades.

From the start of the 1990s until 2015, global poverty dropped at an average rate of 1% per year. Progress then slowed, as a result of the twin forces of wars and climate change, but 2020 will be the first rise in extreme poverty since 1998, when the Asian financial crisis hit the global economy.

Who has been hit hardest?

Alongside the $1.90-per-day measure of extreme poverty, the World Bank also tracks poverty at $3.20 a day, the typical line for lower-middle-income countries, and $5.50 a day, typical for upper-middle-income countries.

While fewer than one in ten people in the world live on less than $1.90 a day, close to a quarter of the world’s population subsists below the $3.20 line, and more than 40% - almost 3.3 billion people in total - live below the $5.50 line, the report says.

The financial fortunes of this 40% of the world’s population is referred to as “average global shared prosperity”.

The Covid crisis is believed to have already diminished this shared prosperity, which according to the World Bank, is forecast “to stagnate or even contract” over the course of the year ahead “due to the reduced growth in average incomes”.

The international financial institution also notes that while extreme poverty has traditionally hit people in rural locations hardest, increasing numbers of urban dwellers are now being affected.

At the other end of the scale, meanwhile, the world’s wealthiest people have seen their fortunes swell throughout the pandemic.

Billionaires saw their combined wealth climb by 27.5% to $10.2tn (£7.9tn) from April to July this year, according to a report from Swiss bank UBS - topping the previous high set in 2017.

Why is Covid causing so much damage?

The World Bank says that extreme poverty has been exacerbated not just by the virus but by lockdowns, stay-at-home orders, disruptions to the manufacturing and supply chains, the collapse of the tourism industry, and the sharp decline of demand for oil around the world.

Or as Vox puts it, “most of the devastation was not caused directly by the virus but by the worldwide economic recession brought about by the virus and our efforts to fight it”.

What can be done to reverse the problem?

Since 2013, the World Bank has been working towards the target of having no more than 3% of the global population living on just $1.90 a day by 2030.

In the absence of the global pandemic, the poverty rate was expected to fall to 8% by the end of 2020, down from 9.1%. But now, it is on course to reach 9.4%.

“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 World Bank Group President David Malpass.

The organisation is also calling on countries where extreme poverty is most prevalent to work towards developing their aid distribution infrastructure.

The Bank’s report says: “In some countries, assistance has so far reached less than one-quarter of households whose incomes fell, and only 10%-20% of firms reported receiving assistance since the pandemic began.”

Malpass has pledged to support developing countries in the push to resume growth and respond to the impacts of Covid-19 while working toward a “sustainable and inclusive recovery”.


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