The number of people living in poverty in the East Asia and Pacific (EAP) region could increase for the first time in 20 years, according to a World Bank report released on Monday.
COVID-19’s toll on the economy will result in 38 million people remaining in or being pushed into poverty — which the report defines as living on an income of $5.50 a day — due to the pandemic.
The report stated that COVID-19 has delivered a triple shock to the EAP region’s economies — the pandemic, the impact of domestic lockdown measures, and reverberations of the global recession. Due to the three-fold impact, the entire region is only expected to grow by 0.9% in 2020 — the lowest rate of growth since 1967.
"COVID-19 is not only hitting the poor the hardest, it is creating 'new poor,'" Victoria Kwakwa, vice president for East Asia and the Pacific at the World Bank, told CNBC. "The region is confronted with an unprecedented set of challenges, and governments are facing tough choices."
In the age of #COVID19, policy choices to contain the disease and provide relief TODAY would ideally be informed by how they will affect recovery and growth TOMORROW. Download the @WorldBank's latest #EAPUpdate to learn more: https://t.co/nWIOEEDPaB#ResilientRecoverypic.twitter.com/BBoTllqSZE
— World Bank Asia Pacific (@WB_AsiaPacific) September 29, 2020
At first, the pandemic forced governments to redirect funds to health care, personal protective equipment, and to prevent large scale bankruptcy. EAP governments, on average, committed nearly 5% of their GDP to crisis relief in the early stages of the outbreak, the report said.
Lockdowns and social distancing measures pushed economies further into recession as productivity, business, and sales were put on hold to prevent the spread of the virus.
While many countries in the EAP region have now been able to contain the virus and lift some lockdown measures, the global recession will continue to have major impacts on the economy.
The EAP region relies heavily on the rest of the world for tourism and international trade. Another report by the World Bank noted that the global economy was is expected to contract by 5.2% in 2020, and EAP countries will bear the brunt of financial hardships.
The World Bank also explained that countries that will be hit the worst by the pandemic are those that rely heavily on global trade, tourism, commodity exports, and external financing.
Due to the pandemic, human capital and productivity have been eroded by sickness, food insecurity, job loss, and school closures, according to the World Bank. Fiscal constraints have led to limited public investments, which could increase debt long term. Private investments have also slowed due to global uncertainty and the increase in private debt.
Without actions by governments and aid agencies, regional growth could be stunted by 1% for the next decade, the report warned.
The World Bank report highlights the overall trend of more people being pushed into poverty around the world because of the pandemic. The financial institution predicts that the number of people living in extreme poverty will rise by 70 to 100 million this year.