The economic fallout of COVID-19 could plunge up to half a billion more people into poverty, increasing global poverty by 8 percent, according to a working paper published by the United Nations University’s World Institute for Development Economics Research UNU-WIDER.
If this projection is accurate, it would be the first time that poverty has increased globally since 1990.
"The economic crisis is potentially going to be even more severe than the health crisis," study-co-author Christopher Hoy, an economist and public policy expert from The Australian National University (ANU), said in a statement.
"COVID-19 will push tens of millions of people back into extreme poverty and they will not be able to meet their basic needs."
Researchers from King's College London and ANU estimated the increase in global poverty resulting from three different scenarios: low, medium, and high income or consumption contraction in developing countries by 5, 10, and 20 percent, respectively. Under the worst-case scenario of 20 percent, they estimated that 400 to 600 million people would be driven into poverty.
The most affected areas of the world will be developing countries and vulnerable communities. The research estimates around 40 percent of the so-called “new poor” could be concentrated in East Asia and the Pacific, while a third would be found in Sub-Saharan Africa and South Asia. A remaining 10 percent each would be in the Middle East and North Africa, Latin America, and the Caribbean.
While governments from economically rich nations have already rolled out economic stimulus packages and social safety nets, most developing nations lack the immediate finances to take similar action.
Scientists, economists, and governments are currently faced with the stark challenge of making a trade-off between peoples' health and the global economy, a collapse of which would spell further death, poverty, and misery. All paths ahead are uncertain and there are no easy choices, although it's becoming increasingly clear that ambitious global policy changes are needed if the world wants to temper the oncoming economic crisis.
In light of the report, OXFAM has called for world leaders to agree on an “Economic Rescue Package for All” to safeguard poor communities and keep the world economy afloat, ahead of the key International Monetary Fund, World Bank, and G20 finance ministers virtual meeting later next week. Part of this plan involves the immediate cancellation of $1 trillion worth of developing country debt payments in 2020.
“Governments must learn the lessons of the 2008 financial crisis where bailouts for banks and corporations were paid for by ordinary people as jobs were lost, wages flatlined and essential services such as healthcare were cut to the bone,” Jose Maria Vera, Oxfam International Interim Executive Director, said in a statement in response to the report.
“Economic stimulus packages must support ordinary workers and small businesses, and bailouts for big corporations must be conditional on action to build fairer, more sustainable economies.”
A setback of the largest size modeled could potentially reverse a decade of global progress on poverty reduction and will most likely scupper the UN's Sustainable Development Goal of ending poverty by 2030.