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Abstract
The global recession caused by COVID-19 will lead to the first increase in global poverty in decades. The extent of the increase in poverty depends on the availability and effectiveness of social assistance. In the benchmark scenario, that takes no account of social assistance, when ranking countries most affected by the pandemic’s resulting recession, the top half (most affected) countries make up 15% of the world population and 19% of the world’s poor. However, these figures change substantially when we adjust the ranking to incorporate, alongside the recessionary effects, dimensions of each country’s social assistance programmes. When we adjust the recession ranking to incorporate the generosity of social assistance in each country, the top half (most affected) will constitute 39% of the total population and 45% of the world’s poor. Individual countries’ expected poverty levels are also strongly affected by which dimension of social assistance is considered in the calculation. This highlights the important role that social assistance plays in mitigating the effects of such a sharp and unexpected negative economic shock for the world’s poorest people. Unfortunately, many countries do not provide social assistance that is sufficiently generous and inclusive of, or targeted at, their poorest quintile. Consequently, these vulnerable segments of their populations are likely to suffer severely as a result of the recession.
Highlights
The pandemic has caused a global recession, but what are its implications for poverty? COVID-19 has led to major disruptions all over the world, including the triggering of the worst global recession in decades, with an estimated 5.2% contraction in global GDP [1]
Changes in poverty based on the efficacy of social assistance To provide a baseline sense of how the recession, absent any social assistance, might affect poverty, we first present a map showing which countries should be most affected by the recession based on their GDP, without taking into account any ameliorating social assistance measures
Conclusion and policy recommendations The effect of the impending recession on poverty in different countries will depend on the state of social assistance
Summary
The pandemic has caused a global recession, but what are its implications for poverty? COVID-19 has led to major disruptions all over the world, including the triggering of the worst global recession in decades, with an estimated 5.2% contraction in global GDP [1]. The World Bank predicts that the pandemic will result in the first increase in extreme poverty (the number of people living on an income below the international poverty line- $1.90 per day) to take place in the last 20 years. We focus on the poorest quintile of people because they are the most income vulnerable, given they are either already in poverty or are most likely to be on the brink of poverty These individuals are likely to be employed informally, and so are at greater risk of losing their jobs during strict lockdowns and/or a recession [3]. They probably have limited resources and savings to tide them over this uncertain period
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