- Forecasts suggest COVID-19 is likely to cause the first increase in global poverty since 1998.
- Using the most recent data, the World Bank has predicted coronavirus is pushing 40-60 million people into extreme poverty.
- The areas most affected depend on the impact of the virus on economic activity and the number of people living close to the international poverty line.
COVID-19 is taking its toll on the world, causing deaths, illnesses and economic despair. But how is the deadly virus impacting global poverty? Here we’ll argue that it is pushing about 40-60 million people into extreme poverty, with our best estimate being 49 million.
Nowcasting global poverty is not an easy task. It requires assumptions about how to forecast growth and how such growth will impact the poor, along with other complications such as how to calculate poverty for countries with outdated data or without data altogether. All of this goes to say that estimating how much global poverty will increase because of COVID-19 is challenging and comes with a lot of uncertainty. Others have tried to answer the question using general equilibrium models or by exploring what will happen if all countries’ growth rates decline a fixed amount. Here we’ll try to answer the question using household survey data and growth projections for 166 countries.
In particular, we take data from the latest year for which PovcalNet (an online tool provided by the World Bank for estimating global poverty) has poverty estimates for a country and extrapolate forward using the growth projections from the recently launched World Economic Outlook, in which global output is projected to contract by 3% in 2020. This approach assumes that countries’ growth accrues equally to everyone, or in other words that COVID-19 does not change inequality within countries (more on that below). Comparing these COVID-19-impacted forecasts with the forecasts from the previous edition of the World Economic Outlook from October allows for an assessment of the impact of the pandemic on global poverty. Of course other factors may have also worsened (or improved) countries’ growth outlooks between October and April but it’s safe to say that most of the changes in the forecasts are due to COVID-19.