Global poverty reduction is slowing, regional trends help understanding why

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The latest global poverty estimates show that 9.2% of the global population lives below the $1.90 international poverty line in 2017. This translates into 689 million people still living in extreme poverty. As discussed in the Poverty and Shared Prosperity report published last month, the new estimates confirm a slowdown in the pace of poverty reduction, which has been observed over the last few years (also see discussion in the previous edition of the report). Between 1990 and 2015 the global rate of extreme poverty fell at a rate of about 1 percentage point per year, from 36.2% to 10.1%, more than halving the number of poor over that period. The new estimates show that poverty reduction has slowed down in recent years and that global poverty fell from 10.1% to 9.2% between 2015 and 2017 (less than half a percentage point per year). While this deceleration makes the 3% target difficult to reach, the current COVID-19 pandemic is predicted to cause the first increase in global poverty since the Asian financial crisis.

One reason for the deceleration observed in the 2017 global poverty estimates is Sub-Saharan Africa’s slower pace of poverty reduction compared with other regions, in line with the projection that extreme poverty will be a predominantly African phenomenon in the coming decade. Figure 1 shows the regional trends in poverty rates at the US$1.90 line. Sub-Saharan Africa’s poverty rate remains stubbornly high at above 40%, resulting in the number of poor to actually increase between 1990 and 2018. Given the relevance of Africa in driving global extreme poverty, the Poverty and Shared Prosperity report provides an analysis of poverty in the region and discusses some of the global challenges that will likely hit the region the most: climate change and conflict.

Figure 1 Poverty rates at the US$1.90 line, by region 1990-2018

Africa’s slow progress in reducing extreme poverty is particularly striking when compared with East Asia and the Pacific’s trend, where the poverty rate fell from 60% to 1% between 1990 and 2018.  Another reason behind the deceleration in global poverty reduction is the rise in poverty in the Middle East and North Africa.  The share of the population living below the US$1.90 line rose from 3.8 to 7.2 percent between 2015 and 2018, driven largely by the economies in the region that are affected by conflict. Conflicts also limit the availability of recent household survey data in these countries, suggesting considerable uncertainty over the poverty estimates in the region. With these caveats in mind, the lined-up estimates suggest that the number of poor more than doubled between since 2015 and that 28 million people live in extreme poverty in the region.

While extreme poverty is predominantly concentrated in Sub-Saharan Africa, where 431 million people live below the US$1.90 line in 2017, the country with the largest estimated number of poor is India. Figure 2 shows the global distribution of the poor in 2017, for regions and countries. When a country does not have a household survey in 2017, the available surveys are extrapolated or interpolated to 2017 to allow for a comparison of all countries with respect to  a common reference year. While this produces global poverty numbers that incorporate as many countries as possible, this requires additional assumptions that may not hold for every country. This is particularly relevant for India, where the latest comprehensive household consumption expenditure survey data available for estimating poverty date back to 2011/12. This considerably raises the uncertainty over our understanding of poverty in the country. Due to India’s large population, it also increases the uncertainty of the poverty estimates for recent years for South Asia, and the world, and is the primary reason that the global poverty numbers can only be reported up to 2017 (and the regional estimate for South Asia in Figure 1 stops in 2014).

Figure 2 Global distribution of the Extreme poor at the US$1.90 line, by region and economy 2017

Poverty is highly concentrated, not only among regions, but also among countries. For example, the three countries with the most poor (India, Nigeria and the Democratic Republic of Congo) account for 40% of the global poor. Over a quarter of the global poor live in just four African countries, namely Nigeria, the Democratic Republic of Congo, Ethiopia and Tanzania. Until 2030, we have simulated that this trend will become even more pronounced  and extreme poverty will be largely concentrated in Africa. This concentration and the slow pace of poverty reduction in Africa also imply that it is unlikely that the World Bank’s target of 3% global poverty in 2030 will be reached. If all countries in Sub-Saharan Africa were as successful as China over the past decades, reducing the poverty rate by around 2 percentage points per year, we would come close to the 3% target. This will require growth in the region that is about five times what has been observed historically (see chapter 1 of the report), or slightly lower growth combined with reductions in inequality. But even in these hypothetical scenarios in which the global goal is reached, many African countries will have poverty rates that are in the double digits, with a third of all countries having a poverty rate above 10% and just over 10% of the region living in poverty. Yet, this would be a remarkable success compared to the business-as-usual scenario under which by 2030 one in three Africans would still live in extreme poverty.

 

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