COVID-19 Impacts on Global Poverty
As the COVID-19 pandemic spreads, social and economic relief measures—including fiscal stimulus and expansion of social safety nets—are crucial to prevent poverty and hunger from rising dramatically in developing countries.
In a new scenario analysis, David Laborde, Will Martin and Rob Vos estimate that globally, absent interventions, over 140 million people could fall into extreme poverty (measured against the $1.90 poverty line) in 2020—an increase of 20% from present levels. This in turn would drive up food insecurity. Under the assumptions, we project a downturn in global economic growth of 5% in 2020. Our scenarios, also indicate the poorest nations face significantly greater adversity. The negative impact is affecting sectors of the economy and the urban vs rural households differently as well. Without social and economic mitigation measures, the impact on poverty would be devastating. There should also be concerted efforts to keep trade channels open to avoid piling an unnecessary food price crisis on the current health and economic disasters facing the world.
COVID-19 Poverty Impact Dashboard
Cases of COVID-19 worldwide have grown exponentially since our previous analyses of the pandemic’s impacts on global staple food markets and poverty and hunger.
COVID-19 Impacts On Global Poverty
A downturn in global economic growth of 5% in 2020. This projection is broadly similar to the recent IMF forecast, which shows a downturn of the world economy from the 2%-3% growth anticipated pre-pandemic to an actual decline of 3%.
Africa South Of The Sahara, Southeast Asia And Latin America
The economic fallout would lead to a decline of developing countries' aggregate GDP of 3.6%, but economies in Africa south of the Sahara, Southeast Asia and Latin America would be hit much harder due to their relatively high dependence on trade and primary commodity exports.
China And The Rest Of East Asia
The recession is expected to be less severe in China and the rest of East Asia, where we expect the economic recovery to start sooner with the earlier lifting of containment measures.
Urban And Rural Populations
Urban and rural populations in Africa south of the Sahara would suffer most, as 80 million more people would join the ranks of the poor, a 23% increase. The number of poor in South Asia would increase by 15% or 42 million.
High-Income Countries And International Organizations' Role
High-income countries and international organizations should work to provide low- and middle-income countries with the necessary fiscal space and import capacity to expand health and social protection programs. Honoring the multiple calls for official and commercial debt relief would also help.
Monitoring Potentially Damaging Policy Measures
There should also be concerted efforts to keep trade channels open to avoid piling an unnecessary food price crisis on the current health and economic disasters facing the world.
Learn more about the MIRAGRODEP model and the key assumptions for the scenario analysis.
Overvew of the MIRAGRODEP Model
MIRAGRODEP is a global Computable General Equilibrium (CGE) model based on MIRAGE (Modelling International Relations under Applied General Equilibrium). The model was developed and improved with the support of The African Growth and Development Policy Modeling Consortium (AGRODEP). It is a multi-region, multi-sector, dynamically recursive CGE model. MIRAGE was initially developed at CEPII and was devoted to trade policy analysis; this original model was used at IFPRI prior the development of the MIRAGRODEP version and continues to be used in CEPII (France) and by various international and academic institutions around the world. The core MIRAGRODEP model is an open-source resource distributed by the AGRODEP network, with training sessions held periodically to teach researchers how to use the model. As opposed to a single country CGE model, the model uses a multi-country CGE model allows for a detailed and consistent representation of Rest of the World. In this way, international economic linkages are captured through the international trade of goods, as well as through the movement of people and capital, especially the foreign direct investment (FDI).
As a global CGE, MIRAGRODEP provides a rich set of indicators for each region, which allows us to measure the impact of any policy changes on both macroeconomic aggregates and inequality indicators. Such indicators include: changes in production, production factor uses, real wages, value added by sector, real GDP, real income, exports, imports, terms of trade, land use changes, calories consumption and production per capita, and poverty head counts. The can be used under different sets of assumptions in order to be easily adaptable to the issue at hand (for example, perfect and imperfect competition, dynamic or static approach, imperfection on labor markets, or alternative macroeconomic closures).
Key Assumptions For The Scenario Analysis
All countries affected by COVID-19 implement social distancing measures covering on average 40%-50% of the population for between 2 and 3 months.
International travel is essentially shut down, closing many tourism-related activities.
Social distancing measures allow only essential work, such as food production and distribution, under normal conditions. We assume further that, on average, one third of skilled workers can continue to work effectively via various forms of telecommuting.
The containment measures cause bottlenecks and delays in international transport, pushing up freight costs by 3%.
While agriculture and food sectors have been identified as essential in most countries, we also assume some supply disruption caused by reduced labor mobility (e.g., for seasonal migrant labor) and further, that perishable farm products suffer greater post-harvest losses of 5% due to logistics problems and demand fallout.
The present scenario accounts for the economic stimulus packages being implemented by countries in North America and in Europe, including significant income transfers to households. The scenario does not consider any additional international support or government stimulus in developing countries.