As COVID-19 May Push 100m Into Poverty
The World Bank Group, on Thursday, released the June 2020 edition of its Global Economic Prospects, reviewing the impact of the Coronavirus (COVID-19) pandemic released in April, and warning that the global economy could shrink this year by 5.2%.
Per capita incomes are expected to decline by 3.6%, tipping between 71 and 100m people across the globe into extreme poverty, measured at below $1.90 per day, up from the previously predicted 40-60m.
Owing to the impact of pandemic, the report said more people from three countries: Nigeria, India, and the Democratic Republic of Congo, will slip below the poverty line, given that population will grow faster than their GDP this year and beyond. The three nations are home already to over a third of the world’s poor, at a time,
While Nigeria could record per capita growth rate in real GDP of –0.8% this year, its population growth rate is estimated at 2.6%; with India faring better with its GDP estimated to grow by 2.1%, faster than its 1.0% population growth rate; while DRC is forecast to have GDP growth of 0.3%, while a population climbs 3.1% up.
These growth rates, according to a review jointly authored by Daniel Gerszon Mahler, Young Professional, Development Data Group, World Bank; Christoph Lakner and R. Andres Castaneda Aguilar, both Economist at the Development Data Group of the World Bank; and Haoyu Wu, Consultant, Poverty and Equity Global Practice; are hardly enough for sustainable decreases in the poverty headcount, especially given that “the epicenter of the pandemic has shifted from Europe and North America to the global south.
Economic activity among advanced economies, the report anticipates would shrink 7% in 2020 given the severe disruption in domestic demand and supply, trade, and finance; even as emerging market and developing economies (EMDEs) are expected to shrink by 2.5% this year, their first contraction as a group in at least 60 years.
The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing, the report noted.
While the magnitude of disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development.
According to World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu, “this is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges.
“Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment,” he stressed.
Under the baseline forecast—which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting — global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%.
However, the World Bank warned, outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.
“The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades,” the bank’s Prospects Group Director, Ayhan Kose explained.
The current episode, he continued, “has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”