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Coronavirus could turn back the clock 30 years on global poverty

Guest content
12 April 2020

The economic impact of the global shutdown could push half a billion people into privation, researchers warn.

Half a billion people could be pushed into poverty as economies around the world shrink because of the coronavirus outbreak, a new study has warned.

Poverty levels in developing countries could be set back by up to 30 years, research released by the United Nations University’s World Institute for Development Economics Research warned on Thursday.

“The impact will be quite devastating,” said co-author Andy Sumner, international development professor at King’s College London, who warned of a “poverty tsunami”.

“Covid could lead to a very large increase in global poverty, in fact it could send the world back 10 years and could send some regions back 30 years,” said Sumner.

The researchers used World Bank data to measure the effects of reduced amounts of money being spent in economies at three poverty levels – $1.90 (£1.53), $3.20 and $5.50 per day.

The results showed that even if consumption shrunk by 5% – the smallest impact they modelled – it would lead to the first increase in income-related poverty since 1990.

With international financial leaders meeting next week, the research has prompted calls for quick action to safeguard vulnerable populations who will not be able to ride out strict quarantine measures of the type being implemented in Europe.

Oxfam has called for world leaders to agree a $2.5tn economic rescue plan to “to keep poor countries and poor communities afloat”.

Sumner said urgent action is needed to create a system of safety nets that would soften the immediate blow of income loss, as well as policies to ensure people are not left mired in long-term poverty.

“I don’t think you can wait another 30 years for people to return again to where they were,” said Sumner.

"The time it takes to reduce poverty can be quite a while so governments have to think about how to speed that up anyway, regardless of Covid-19, but you’re going to need some quite bold redistributive programmes.”

He said the potential impact of Covid-19 raised questions about the progress of the sustainable development goals set by the UN in 2015, including on universal healthcare access.

Sumner said many developing countries would suffer because of their informal economies, with many people forced to continue working despite lockdowns or, as in India, having to return to villages where they will have few resources and potentially spread the virus.

Human Rights Watch warned in March that a lockdown in India, where 80% of people work in the informal sector, left tens of thousands of migrants workers stranded, and could worsen hunger and homelessness.

The International Labour Organization said the world’s 2 billion informal workers are most at risk because they are forced to continue working in high-risk environments and often live in cramped accommodation with limited access to sanitation.

The report’s authors based their research on models that calculated whether consumption would shrink by 5%, 10% or 20%.

The worst impacts were likely to be felt in south Asia and sub-Saharan Africa, where the report estimated 80% of people newly forced into poverty would be located, based on a poverty level of $1.90 a day and a contraction of 10%.

East Asia would host a higher proportion, however, if the broader understanding of poverty levels was taken into account, making up 40% of the newly poor at the $5.50 per day line of poverty.

Oxfam said a new global economic plan should include the cancellation of $1tn of debt owed by developing countries, adding that the same amount should be put into an international reserve that countries could use to build up their health systems.

“For the billions of workers in poor countries who were already scraping by – pulling rickshaws, picking tea or sewing clothes – there are no safety nets such as sick pay or government assistance,” said Danny Sriskandarajah, head of Oxfam GB.

"Our world is facing a huge challenge, but we can get through it if we pull together. Next week’s World Bank and G20 meetings are an important opportunity for world leaders to collaborate on a joint economic rescue package to protect the most vulnerable people.”

Original source: The Guardian