Compass Money: World Bank Poverty Report – Progress at a Regress
The World Bank estimates that the COVID-19 pandemic has forced an additional 88 million to 115 million people into extreme poverty this year, according to the biennial report published on October 7. This means that between 703 million and 729 million people are in extreme poverty, and that the number could rise further in 2021.
Extreme poverty is defined as living on less than $1.90 a day, or about $700 a year.
The pandemic, coupled with climate change and ongoing conflicts, has resulted in extreme poverty for between 9.1 percent and 9.4 percent of the world’s population this year. If the pandemic had not occurred, the rate of global poverty was predicted to drop to 7.9 percent this year.
For the past 30 years, there has been relatively little disruption in the upward trend of living standards for the poor across the globe. Even during the 2008 financial crisis, there were fewer and fewer people living in extreme poverty due to the emerging markets of India and China.
In fact, since 1990, many of the 1.5 billion people who lived in extreme poverty in East and South Asia were lifted out of poverty due to the rise of the Chinese and Indian economies. Latin America, too, saw a massive reduction in poverty in decades past, with the number of people living in poverty falling by more than 50 percent.
The current situation is “the worst setback that we’ve witnessed in a generation,” says Carolina Sánchez-Páramo, the Global Director of the Poverty and Equity Global Practice at the World Bank. This setback is likely to hinder achieving the United Nations’ Sustainable Development Goals, one of which is to eradicate extreme poverty by 2030.
The World Bank tweets that the pandemic has pushed up to 115 million people into extreme poverty worldwide. (Twitter)
As a result of the pandemic, a new category of the population has emerged: the “new poor.” According to the World Bank, the new poor is a label for those who became poor only as a result of the COVID-19 outbreak. In the past, the extreme poor were usually young, uneducated people who lived in rural areas and worked in agriculture. Now, many who have higher education levels, live in urban areas, and work in industries such as construction and manufacturing are suffering from poverty as well.
Depending on the severity of the contraction in global economies, the total number of people in extreme poverty may rise to as high as 150 million by next year.
David Malpass, the World Bank president, offers a way forward: “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, labor, skills, and innovation to move into new businesses and sectors. World Bank Group support—across IBRD [International Bank for Reconstruction and Development], IDA [International Development Association], IFC [International Finance Corporation] and MIGA [Multilateral Investment Guarantee Agency]—will help developing countries resume growth and respond to the health, social, and economic impacts of COVID-19 as they work toward a sustainable and inclusive recovery.”