The coronavirus (COVID-19) is a crisis like no other the world has faced in recent decades in terms of its potential economic and social impacts. We estimate that the pandemic could push about 49 million people into extreme poverty in 2020.
A large share of the new poor will be concentrated in countries that are already struggling with high poverty rates, but middle-income countries will also be significantly affected. Almost half of the projected new poor (23 million) will be in Sub-Saharan Africa, with an additional 16 million in South Asia. The number of extreme poor in the poorest countries that are served by the World Bank’s International Development Association is projected to increase by 17 million. At the same time, 22 million of the projected new poor will be in middle-income countries.
"We estimate that the pandemic could push about 49 million people into extreme poverty in 2020."
The measures taken to contain COVID-19 will affect households in many ways, including job loss, loss of remittances, higher prices, rationing of food and other basic goods, and disruptions to health care services and education.
While the impacts will be felt by most households almost immediately, they will likely be deeper and longer-lasting among the poor, who are more vulnerable for several reasons:
- Where they live. The poor live primarily in rural areas. While this could minimize their exposure to the disease, it also means they have limited access to health services. Moreover, since rural households tend to depend more on domestic remittances from urban migrants, economic shutdowns in urban areas will hurt them too. The poor in urban areas, on the other hand, live in congested settlements with low-quality services, which would significantly increase their risk of being infected by the contagion. Disruptions in food markets could be more severe in urban areas.
- Where they work. The poor work largely in the agriculture and service sectors and are usually self-employed or informally employed, mainly in micro and family enterprises. Those employed in the informal service sector in urban areas are likely to bear the most severe initial impacts. In addition, many of the vulnerable non-poor, who are increasingly employed in the gig economy, particularly in middle-income countries, will also be at risk of slipping into poverty. Those engaged in agriculture may be able to cope, at least initially, with potential disruptions to food supplies or price spikes, but are likely to be affected by a decline in demand in urban areas over time.
- High dependence on public services, particularly health and education. In the immediate term, limited access to high-quality and affordable health services can have devastating impacts in the event of an illness in the family, while school closures can lead to a decline in food intake among children of poor families who rely on school feeding programs. In the long term, the impacts of lost months of schooling, early childhood interventions, health check-ups, and nutrition can be particularly high for children in poor families, adversely affecting their human capital development and earning potential.
- Limited savings and lack of access to insurance. This, in the absence of adequate safety nets, can force the poor to rely on coping strategies with potential long-lasting negative effects, such as the sale of productive assets or diminished investments in human capital.
The experience of affected countries suggests thatStringent health containment measures have brought a large share of economic activity to a halt, leaving many urban poor and vulnerable without a way to make a living. The risk of disruptions to the food supply and markets could also be higher in urban areas, while and the ability of households to deal with potential shortages or prices hikes for food and other necessity items could be lower.
At the same time, governments’ capacity to quickly provide income support to affected households in these areas is limited. Existing safety net programs largely target rural areas, and support for businesses probably will only benefit those in the formal sector. As a result,
"Emerging data from affected countries suggests that the poverty and distributional impacts of COVID-19 are materializing fast, with dire consequences."
Emerging data from affected countries suggests that the poverty and distributional impacts of COVID-19 are materializing fast, with dire consequences. One of the first available rapid phone surveys that assessed the impacts on livelihoods took place in China’s rural areas. It found that about half of the villages surveyed experienced income losses averaging 2000-5000 RMB ($282-$704) per family over the previous month. Villagers are reducing their spending on food as a result, with significant consequences for nutrition and long-term human capital development.
Similarly, phone surveys in Bangladesh in March show that 93 percent of individuals interviewed experienced income losses averaging 75 percent over the previous month, and around 72 percent lost their jobs or saw their economic opportunities reduced. As a consequence, the number of respondents living under the national poverty line has increased from 35% to 89%.
Policies needed to mitigate poverty and distributional impacts will have to respond to each country’s context and circumstances. Having said that, the numbers above suggest that across affected countries:
- An effective response in support of poor and vulnerable households will require significant additional fiscal resources. A back-of-the-envelope calculation can illustrate this. Providing all the existing and new extreme poor with a cash transfer of $1/day (about half the value of the international extreme poverty line) for a month would amount to $20 billion —or $665 million per day over 30 days. Given that impacts are likely to be felt by many non-poor households as well and that many households are likely to need support for much longer than a month, the sum needed for effective protection could be far higher.
- Any support package will need to quickly reach both the existing and new poor. While existing safety net programs can be mobilized to get cash into the pockets of some of the existing poor relatively quickly, this is not the case for the new poor. In fact, the new poor are likely to look different from the existing poor, particularly in their location (mostly urban) and employment (mostly informal services, construction, and manufacturing).
- Decision-makers need timely and policy-relevant information on impacts and the effectiveness of policy responses. This can be done using existing, publicly available data to monitor the unfolding economic and social impacts of the crisis, including prices, service delivery, and economic activity, as well as social sentiment and behaviors. In addition, governments can use mobile technology to safely gather information from a representative sample of households or individuals. Phone surveys can collect information on health and employment status, food security, coping strategies, access to basic services and safety nets and other outcomes closely related to the risk of falling (further) into poverty.
The World Bank Group is helping countries respond in all these ways and more, by providing governments with data, policy advice, and financial resources so they can effectively protect households and firms from the social and economic impacts of COVID-19 and build resilience.
These advise are based on macro economics with governments being the primary beneficiaries and drivers of the policies and measures but we know that for countries in Africa it is quite overwhelming due to peculiar challenges and private sector including sociopreneurs will have to put hands on deck to cushion the effect. My concern is what world bank has for other players mentioned. I for one would love to contribute in the area of education and capacity building but lack the financial capacity. Does the world bank have structures to accommodate people like us? If yes, how?
That will be of great help really to people living with extreme poverty. Although this pandemic has really drove almost 60% of the worlds population into poverty.
So, if the world bank want to help the poor, I think it will be advisable to have a platform where the people of the targeted area will be given a chance to register and give details of their accounts so that the world bank itself will do the transfer and that will prevent diversion of funds which was meant for the poor to the rich once.
Corona virus makes an economic impact, therefore, poverty is no longer appear far at home, peoples depends on work in order to make different.
I believe the World Bank Group is helping countries respond in all these ways and more,by providing governments with data, policy advice, and financial resources so they can effectively protect households and firms from the social and economic impacts of COVID-19 and build resilience ,if so why the World Bank Group sounds so skeptical and pessimistic that the COVID 19 will affect households in many ways, including job loss, loss of remittances, higher prices, rationing of food and other basic goods, and disruptions to health care services and education.Yet you claim that you helping countries respond in so many ways , I believe something can be done to avoid this all thing. I rest my case.
Thank you very much,
I am a development worker and live in Bangladesh. I read in this article.
This article is very nice and very realistic. It will help mitigate the challenges of current pandemic.
As a consumer and a women I would be happy to buy more 100% cotton textile products (e.g. jeans, casual wears) originating in Bangladesh. Personally I have been satisfied with the quality and the price of the products labelled Bangladesh as the country of origin. I would recommend this country to use cotton materials made in Bangladesh for the production of underwears to be exported because the quality of the material what I have known would be great for this purpose, too.
I really appreciate this analysis and is quite enriching as policy makers brainstorm on strategies how to deal with covid-19. For most African governments the tendency is to prioritise the rural poor, but this pandemic will also seriously affect the urban poor and non-poor that can be easily dragged into hunger and poverty due to loss of jobs and price spikes of staple foods. unfortunately, most of the poor countries are simply copying developed countries strategies such as lock-down without accompanying strategies to limit vulnerability of poor communities that can be triggered by such strategies. In other poor countries we have witnessed the poor communities resisting lock-down strategies. One should not be mistaken to assume that these poor communities don't understand the positive impacts of lock-down---i.e., that it aims at flattening the curve-slowing down the spread of the virus and help the health services to cope. Most of the urban poor are daily wage earners and involved in the informal sector. They have no savings at all. Therefore, lock down without accompanying strategies to support or cushion their livelihoods will expose them to hunger and malnutrition, water borne diseases such as diarrhea. As such, if it is not Covid-19 that kills them, these others will. In fact hunger and malnutrition is the most feared in the African context, as a weak body is vulnerable to many killer diseases and the deadliest one in Africa being Malaria. These poor communities in Africa (example of Malawi where I reside) are rational and therefore choosing their battles right! They are resisting lock down not out of ignorance, but maybe they are weighing their chances of survival among these monsters facing them.
Congratulations Carolina Sanchez Parmo - very well analysed, well researched and timely succinct article and the solutions given by your are very apt for implementation particularly by government level and other decision makers and the need of timely and policy relevant information on impacts and effectiveness of policy responses. I would like to add here that Narendra Modi, Prime Minister of India has been very successful in managing the COVID19 pandemic issue in India with a popuation of 1.3 billion and out of which 65 percentage living in semi urban and rural area of India. Here is my take on this.
Very Great Gesture - US$ 1 Billion from World Bank to India
Published on April 23, 2020
The World Bank has recently sanctioned an amount of US$1 billion to India via a fast track mechanism to tide over the novel COVID19 pandemic A novel timely gesture to help India to further strengthen its current response for its public health preparedness on a pan India basis. This will address such issues as population at risk, medical and emergency personnel and service providers and medical and testing facilities. This will also help devise mechanism to scale up and prevent efforts to limit human-to-human transmission, including reducing local transmission of cases and containing the epidemic from progressing further. India will be able to further its procurement of testing kits; setting up of new isolation wards — including turning hospital beds into intensive care unit beds; infection prevention and control; and purchase of personal protective equipment, ventilators, and medicines, particularly in district hospitals and designated infectious disease hospitals will be scaled up under the project including social distancing monitoring aspects. Ramesh Kumar Nanjundaiya, Sunnyvale, CA 94086
For the urban poor relying on daily wages, lock down and spread prevention measures have significantly reduced their livelihood options. In one low income settlement, some families have resorted to ceding rented space, combining themselves to pool rents and reduce the cost per family. The resulting crowding inside the shanties predisposes them to more infection. In my view relief during the COVID-19 crisis ought to include housing in addition to the ongoing measures on health and food to reduce its impact on the poor.
Thanks for joining the group. I would like to the team to also look at the impact of the transport sector in the poor or middle income countries..
To emiliorate Corona Virus economic consequences on the poor, World Bank can do something and do it differently.
That is, accelerate direct financial loans to rural region farmers and Agro-bussiness linked citizens to increase their productivity and ensure Food Security to avoid Malnutrition Pandemic.t
Diaspora Help Points, not Government platforms already indicted for Corruption, should be the distribtion outlets for
such World Bank Program, "Mitigate Poverty through Direct Financial Support "
In Nigeria , home to largest "Poorest of the poor population segment" in the World, we have such Help Points to help unfold visible and palpable positive outcome !
Your Feed-back will be appreciated.
A timely researched very well analysed article succinctly presented. The solutions discussed are apt during the current times of the Covid19 global pandemic. Particularly well said by you is that the decision-makers need timely and policy-relevant information on impacts and the effectiveness of policy responses. This can be done using existing, publicly available data to monitor the unfolding economic and social impacts of the crisis, including prices, service delivery, and economic activity, as well as social sentiment and behaviors. In this regards, I wish to add that Narendra Modi, the Prime Minister of India is exactly trying to achieve this among the 1.3 billion people on a pan India basis. The best help that has come to India is by the World Bank. They have has recently sanctioned an amount of US$1 billion to India via a fast track mechanism to tide over the novel COVID19 pandemic A novel timely gesture to help India to further strengthen its current response for its public health preparedness on a pan India basis. This will address such issues as population at risk, medical and emergency personnel and service providers and medical and testing facilities. This will also help devise mechanism to scale up and prevent efforts to limit human-to-human transmission, including reducing local transmission of cases and containing the epidemic from progressing further. India will be able to further its procurement of testing kits; setting up of new isolation wards — including turning hospital beds into intensive care unit beds; infection prevention and control; and purchase of personal protective equipment, ventilators, and medicines, particularly in district hospitals and designated infectious disease hospitals will be scaled up under the project including social distancing monitoring aspects.
Ramesh Kumar Nanjundaiya,
Yes it's absolutely true, however the Kenyan government is non responsive towards the emerging poor and existing poor. They seem to be concetrating on the extremely vulnarable while most house holds now have stayed for a whole month without work hense expect no pay. The next food for this families in the coming months is causing a lot of anxiety and discomfort. What advise have you given Kenyan government to respond quickly to the emerging urban and existing poor? Hunger is going to kill us
I quite agree with the writer. Covid-19 could be more dangerous than economic recession of 30's. This is because of the approaches available to combat it. Some countries, especially African countries are already in the mess of food poverty. Locking them down home means locking out their productive activities. The most dangerous part of it is that some of the rural dwellers who are majorly in charge of food production are not taking the issue of corona virus serious. If care is not taken, God forbid, by the time they will realise the importance of lockdown, it might be too late and the consequence might be too unbearable. In Nigeria, for example, we heard some infected persons are not ready to present themselves at the hospitals. Some ran away from the hospital. Unlike in advanced countries, some don't want people to know they are infected. My investigation reveals that some people living in urban centres are contributing money to help people living in their home towns, church members are contributing to help many who earn their daily living on daily basis etc. In a situation like this, I think creating awareness of what covid-19 is, the damages it has been doing and what it can still do etc. should be done so as to fast track its spread and end the pandemic.
I would to join the conversation on various issues on IDA
Thanks for valuable information
Can one-sized response model work for the poor and marginalized? How can we make the response marginalized inclusive?
Hi Carolina, what advise would you give to a poor lady with a little child whose husband who arrived from Singapore and was quarantined at the Hiat Hotel in Chenna (India) after being tested negative at the airport but was found dead two days later.Hotel authorities did not mention his arrival at the hotel or gave any information to his wife.
What do these poor people do in circumstances like this.
I believe that its time we set and champion a deliverable model to start to minimise poverty and slowly eradicating it. The recent global challenges will definitely throw hundreds of millions of people into abject poverty. Africa will be hit the hardest and ultimately entirely dependent on other nations and inadvertently drain their economies likewise and the world will get trapped in a vicious circle.