|Almost 24 million people in Asia and the Pacific will be left in poverty due to the financial impact of the coronavirus pandemic, the World Bank warned. / Photo by Tom Young Wildlife via Shutterstock|
Almost 24 million people in Asia and the Pacific will be left in poverty due to the financial impact of the coronavirus pandemic, the World Bank warned. Those that would be in substantially higher risk are from households that depend on sectors that are vulnerable to the impact of the pandemic, such as manufacturing in Cambodia and Vietnam and tourism in the Pacific Islands and Thailand. The international financial institution also urged the affected region to invest more in medical equipment factories and healthcare to provide subsidies for sick pay that will aid households and help contain the virus at the same time.
Economic fallout and poverty
In a worst-case scenario, the World Bank has predicted that the economic impact of the pandemic will prevent about 35 million people from escaping poverty, 25 million of whom are from China. “Urgent action” is needed to avoid this from happening, it added. People in poverty are those living on $5.50 per day or less.
The bank has projected a 2.3% decline in the baseline forecast of China, which is the epicenter of the outbreak, and such a decline is expected to have a profound impact on the global economy. Back in 1976, when the death of the former Chairman of the People’s Republic of China Mao Zedong ended a social and economic tumult in the country, China had a shrinking economy as well but China now became the second-largest economy in the world. This means that any disruption in the country will also be felt in other countries. The World Bank warned that the economic pain appears to be unavoidable worldwide and the Asia Pacific region should brace for a “serious impact” on welfare and poverty.
While the estimates are only projections, the report underscores the scale of the potential damage to a worldwide economy. It also mentions that the most effective solution against the virtual threat in an economic aspect is having deeper international cooperation.
|The World Bank believes that financial support will help reduce the economic shock caused by the pandemic. / Photo by Moobin via Shutterstock|
Mitigating the economic shock
The World Bank, with a mission of fighting poverty in all its dimensions, has also pledged to provide $14 billion financial support to developing countries. It believes that financial support will help reduce the economic shock caused by the pandemic. It is also set to deploy about $160 billion in commitments in over the next 15 months to protect the vulnerable and poor.
As the virus spreads in many parts of Asia and resulted in widespread lockdowns, fears of having a region-wide recession have grown in the past weeks. The report states that the Asia-Pacific region has already spent months dealing with the economic effects of the trade war between the US and China and now comes the pandemic. Economic growth in the region will significantly decline in “all scenarios” with factories shut down, travel suspended, and stores closed.
The Philippines, Papua New Guinea, and Indonesia will most likely be affected while Myanmar, Mongolia, Laos, Cambodia, and Vietnam are some countries in the region that will likely see growth but at a significantly lower level than it did in 2019.
World Bank’s vice president for East Asia and the Pacific said that on the positive side, the “region has strengths it can tap" yet countries have to act at a scale that they have not previously thought of and to act fast. The economic data from China further sees hope as the factory activity has unexpectedly expanded in March after a collapse in February. The official Purchasing Managers’ Index (PMI) of China increased to 52 in March from 35.7 records in February. The PMI is an index of the prevailing direction of the economic trends in the manufacturing and service sectors.
However, economic research consultancy Capital Economics’ senior China economist Julian Evans-Pritchard said via BBC that it does not mean the output is back to the pre-pandemic trend. It simply suggests that economic activity improved modestly. Analysts have also cautioned that a near-term recovery cannot be assured as the pandemic continues to affect the foreign demand. This was echoed by economics company Pantheon Macroeconomics’ chief Asia economist Freya Beamish. She opined that the March PMI figures of China “merely underscores how bad February was.”
Nevertheless, previous research has suggested ways to boost economic security and cut poverty, such as investing in job-creating strategies to create jobs for the people, rebuilding the infrastructure, renovating abandoned housing, and developing renewable energy sources. Increasing the minimum wage is another solution to reduce poverty to help lift a family out of poverty. Providing paid leaves will also help people balance family and work life without sacrificing the needed income.
East Asia and Pacific: poverty and equity data
The World Bank shows the percentage shares of the poorest quintiles in the recent percentage share of national income or consumption in the East Asia and Pacific: Australia (7.4), China (6.5), Fiji (7.5), Indonesia (6.7), Japan (7.7), Kiribati (6.6), Lao PDR (7.6), Malaysia (5.8), Micronesia (5.5), Mongolia (7.9), Papua New Guinea (5.1), Philippines (5.7), Samoa (6.8), Solomon Islands (7), Thailand (7.2), Timor-Leste (9.4), Vanuatu (6.7), and Vietnam (6.7).
Share of population living in extreme poverty, by world region
The share of population living in extreme poverty in 2015 by world region are the following: Sub-Saharan Africa (41.10%), Middle East and North Africa (5.00%), Latin America and Caribbean (4.10%), East Asia and Pacific (2.30%), and Europe and Central Asia (1.50%), according to scientific online publication Our World in Data. Extreme poverty is defined as living with less than $1.90 per day. It similarly highlighted the topic of misperception about poverty trends in the world. In a survey response in the United Kingdom, for instance, to the question of how global poverty has changed in the last 30 years, 55% of the respondents said that it has increased, 33% said it remained more or less the same, and 12% believe it decreased.
Poverty is a multifaceted and complex problem. Aside from monetary deprivation, people affected by poverty may suffer from a lack of education, basic infrastructure, and other services. Economic growth is the most powerful instrument for improving the quality of life and reducing poverty but since coronavirus pandemic has stopped such growth, recovery will likely be difficult and long.