COVID-19 outbreak has changed the way we perceive the world. For the first time in 20 years, the global poverty rates are to rise because of the pandemic. According to a new World Bank report, the world will have 88-115 million ‘new extreme poor people’ in 2020 due to the novel coronavirus disease (COVID-19) pandemic. The biennial Poverty and Shared Prosperity Report has estimated that the number could rise to as many as 150 million by 2021.
The report released on October 7, 2020, has stated that the global extreme poverty rate is projected to rise by around 1.3 percentage points, to 9.2 per cent in 2020. It has also highlighted that if the pandemic would not have been there, the poverty rate was expected to drop to 7.9 per cent in 2020.
The report released by World Bank in April 2020 estimated 40-60 million people to become extremely poor. The new estimates are almost twice the number.
It is believed that poor people of the countries that already have high poverty rates will bear the most of this, and may fall under the categorization of “new extreme poor”. In fact, according to the new estimates by the World Bank, the population of several middle-income countries will succumb to extreme poverty line conditions.
Several Steps back
Global poverty had declined at the rate of around 1 percentage point per year between 1990 and 2015. In the two-and-a-half decades (1990-2015), the extreme poverty rate declined by 26 percentage points.
However, because of the standstill conditions of many businesses, the livelihoods of many have been affected. There have been massive layoffs across sectors, which will affect the average income of people. The World Bank has said that the average income is projected to decline and this will hit the poorest the most. It has said that the shared prosperity or growth in income of the poorest 40 per cent of a country’s population will suffer due to the economic crisis caused because of the pandemic.
The report highlighted that during 2012-2017, the growth was inclusive and the incomes of the poorest 40 per cent of the population were growing. In fact, the average global shared prosperity was 2.3 per cent during this time. However, now with the pandemic led economic crash, average global shared prosperity may stagnate or even contract over 2019-2021.
In conclusion, it is important to note that the report has clearly emphasised on the need for fast and effective policy actions, without which the COVID-19 crisis may increase the inequality gap in the country. This will only result in furthering the goal of achieving global inclusive growth, away from reach.