Global COVID-19 economic shock could throw another 400 million into extreme poverty

July 1, 2020
While the early spread of COVID-19 outside China was in the richer countries, the Global South is now beginning to bear the brunt of the pandemic

A newly released study has estimated that the economic shock from the COVID-19 pandemic could add a further 80–400 million people to the 727.3 million already living in extreme poverty around the world — based on a conservative poverty line of US$1.90 a day.

When the more realistic poverty line of US$5.50 a day is used, the study found that an extra 124–527 million people would be added to the 3.2 billion (almost half the world’s population) living in poverty.

The study, “Precarity and the pandemic: COVID-19 and poverty incidence, intensity and severity in developing countries”, was undertaken by Andy Sumner, Eduardo Ortiz-Juarez and Chris Hoy for the United Nations University World Institute for Development Economics Research.

The poverty estimates were calculated on the basis of three scenarios: an economic shock that caused a 5%, 10% and 20% contraction in per capita income or consumption as a consequence of emergency measures to contain the spread of COVID-19.

The 5% contraction scenario is based on the International Monetary Fund’s optimistic prediction of the global economic impact of the pandemic and the 10% is based on an estimate by the Asian Development Bank. The most severe 20% contraction scenario is “close to the OECD estimates that a partial or complete nation-wide lockdown could result in a contraction ranging between 15% and 35% among 48 major economies, with a 25% short-term decline in the median economy across developing and advanced economies”.

The authors noted that the 10% and 20% contraction scenarios were more probable, because in low- and middle-income countries, where the share of informal jobs is high, the incomes of the poorest are particularly severely affected by lockdown measures.

According to the study, beyond the rise in people living in extreme poverty, as measured through household income, the pandemic would also have long-lasting effects on health, education and nutrition in the Global South.

The study noted that the UN Development Programme has warned that a global decline in the human development index, as a result of the pandemic, could be “equivalent to erasing all the progress in human development of the past six years”.

The study estimated that approximately 470 million people globally are at higher risk of contracting COVID-19 as a result of pre-existing conditions of malnutrition, lack of access to safe drinking water, and indoor air pollution caused by the use of noxious cooking fuel.

The latest pandemic statistics have already confirmed this prediction. While the early spread of COVID-19 outside China was in the richer countries, the Global South is now beginning to bear the brunt of the pandemic, as this graph produced by ABC News illustrates:


The study also showed that the incidence of global poverty could rise and that the intensity and severity of poverty is also likely to rapidly rise.

As a consequence, the resources needed to lift the incomes of the poor to the poverty line could rise by 60%, from $446 million a day in the absence of a crisis to more than $700 million a day under a 20% contraction.

Poverty is also likely to rise dramatically in middle-income developing countries and there could be a significant change in the distribution of global poverty. Countries that had managed to lift much of their previously poor people to just above the poverty line could suffer dramatic reversals.

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