COVID-19 impact: World will have 150 million ‘new extreme poor people’ in 2021

The world will have 88-115 million ‘new extreme poor people’ in 2020 due to the novel coronavirus disease (COVID-19) pandemic, a new World Bank report released October 7, has said. The number could rise to as many as 150 million by 2021.

This is the first time in 20 years that global poverty rates will go up, according to the biennial Poverty and Shared Prosperity Report.

Global extreme poverty rate is projected to rise by around 1.3 percentage points, to 9.2 per cent in 2020. If the pandemic would not have been there, the poverty rate was expected to drop to 7.9 per cent in 2020.

This is nearly twice the number of ‘new extreme poor’ estimated by the World Bank in April 2020. Six months ago, 40-60 million people were estimated to become extremely poor in 2020.

Most of the ‘new extreme poor’ will be in countries that already have high poverty rates. Several middle-income countries will see significant numbers of people slip below the extreme poverty line. About 82 per cent of the total will be in middle-income countries, according to the new World Bank estimates.

Steps backward 

Increasing numbers of urban dwellers are expected to fall into extreme poverty, the World Bank said. This even as a majority of the rural areas still share the burden of ‘extreme poverty’.

When 52 million people were lifted out of poverty between 2015 and 2017, the rate of reduction slowed to less than half a percentage point per year between 2015 and 2017.

Global poverty had declined at the rate of around 1 percentage point per year between 1990 and 2015.

In two-and-a-half decades (1990-2015), the extreme poverty rate declined by 26 percentage points. It dropped to 10 per cent from nearly 36 per cent.

While less than a tenth of the world’s population lives on less than $1.90 a day, close to a quarter lives below the $3.20 line and more than 40 per cent — almost 3.3 billion people — live below the $5.50 line

Average income of people is projected to decline and this will hit the poorest the most according to the World Bank estimates. Shared prosperity or growth in income of the poorest 40 per cent of a country’s population will suffer due to the pandemic-led deceleration in economic activity, the report said.

Average global shared prosperity may stagnate or even contract over 2019-2021 due to the reduced growth in average incomes, the report warned.

During 2012-2017, the growth was inclusive and the incomes of the poorest 40 per cent of the population grew. In fact, the average global shared prosperity (growth in the incomes of the bottom 40 per cent) was 2.3 per cent during the period.

Without policy actions, the COVID-19 crisis may lead to an increase in income inequality, resulting in a world that is less inclusive, the World Bank noted.