COVID-19 will push 130 million into poverty by 2030, UN report shows

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People leaving Antananarivo, the capital of Madagascar, during the coronavirus pandemic. Photo: Henitsoa Rafalia / World Bank / CC BY-NC-ND

NEW YORK — Global economic losses will likely cause an estimated 34.3 million additional people to fall below the extreme poverty line in 2020, derailing shaky progress on the 2030 development agenda, a new U.N. report on the world economic situation shows.

The coronavirus is expected to slash the global economic output by $8.5 trillion over the next two years, according to the U.N. World Economic Situation and Prospects mid-2020 report, which the U.N. Department of Economic and Social Affairs released on Wednesday.

“What has surprised us is how rapid the deterioration has been. ... We had not anticipated it would dive as quickly as it did.”

—  Elliott Harris, chief U.N. economist

“We have been doing weekly updates since the crisis broke and see a constant deterioration of the economic situation,” Elliott Harris, chief U.N. economist, told Devex. “What has surprised us is how rapid the deterioration has been. We knew it spread instantaneously because of the supply chain constraints, but we had not anticipated it would dive as quickly as it did.”

Approximately 56% of the rise in poverty will occur in African countries, the report finds. And an additional 130 million people may live in extreme poverty by 2030, presenting a major setback for the Sustainable Development Goals, which aim to eliminate poverty and improve other health and inequality measures by the end of the decade.

Already, the majority of the 17 goals were off track in 2019, well before the pandemic. The economic losses will create additional roadblocks for the scattered advancements on the entire 2030 agenda.

Climate change, inequality threaten shaky SDG progress, UN reports

The majority of the Sustainable Development Goals — from zero hunger to no poverty — remain off track, the U.N. finds in its July 2019 SDG checkup.

SDG 10, which calls for the reduction of inequality, is “going to take a rather heavy hit,” Harris said. SDG 1, calling for the end of poverty, will also probably fall off track. And a recent fall in carbon emissions could potentially translate into progress for climate-focused goals, but the drop will need to translate into longer-term progress beyond the pandemic.

“It is clear that the crisis is affecting different groups in different ways, and there are groups that are already behind that will fall really behind,” Harris said.

The report also shows that the global economy is projected to contract by 3.2% this year, marking the sharpest contraction since the Great Depression in the 1930s. While high-income economies will contract by 5% in 2020, low-income countries will shrink by 0.7%.

“In most of the cases, the economic crisis hit the developed countries first. The impact on other countries has been indirect, in the sense that as the demand in the developed countries fell off, the supply coming from the developing countries has followed suit, but there is a bit of a lag,” Harris said, cautioning against blanket statements about developed and developing countries.

“Some countries have large service sectors, there are some that depend primarily on tourism. It is very dependent on how things go in those economies,” Harris said.

Even once travel and work restrictions are lifted, a new normal will likely emerge, the report shows, reshaping human interactions, trade, and globalization. The pandemic and its aftermath will also likely accelerate the shift to digitalization and automation.

Harris described this division between many hourly workers no longer able to perform their jobs and salaried workers able to operate remotely as one of the likely  “lasting consequences” of the crisis, even after economic activity begins to regain speed.

“Some people will have fallen very far behind, indeed, and they will take much longer to catch up, if at all,” Harris said.

Government stimulus packages have varied, but cannot make up for the entire loss of income people are experiencing, and might continue to face.

“It will be impossible for a government to fully replace all the income an individual might lose because of lockdown,” Harris said. “Those who are better placed in society who have work they can carry out online, they will naturally be somewhat ahead of those who are hourly wage earners in occupations where the activity has stopped. That is a real problem.”

Governments worldwide have rolled out stimulus packages, some equivalent to an estimated 10% of their gross domestic product. But the depth and severity of the crisis foreshadows a slow and painful recovery, according to Harris.

“The scope of the packages is limited. In many respects it helps, but it is not enough to solve the problem,” Harris said.

Compounding the challenge is a debt crisis many low-income economies were already facing before the crisis, “flirting with disaster,” Harris said. Now, many of them are in a “real bind,” he explained, and lack the fiscal space to adequately support their health systems and newly unemployed citizens.

Devex Associate Editor Adva Saldinger on COVID-19 and the debt crisis. Via YouTube.

Falling imports and growth are now undermining the debt sustainability of these countries, particularly those that are heavily reliant on tourism revenues and remittances. The report calls for wider debt relief, offered on equal terms to all countries. The G-20 is among the groups that has called for debt relief for the world’s poorest nations.

“A year from now we may have many countries in debt distress and a handful, if not more, who are in a crisis, having defaulted and seen their markets dissolve into chaos,” Harris said. “Time is indeed of the essence here. The more we can do on this, the more likely we can manage debt in a concerted and effective way.”

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About the author

  • Amy Lieberman

    Amy Lieberman is the U.N. Correspondent for Devex. She covers the United Nations and reports on global development and politics. Amy previously worked as a freelance reporter, covering the environment, human rights, immigration, and health across the U.S. and in more than 10 countries, including Colombia, Mexico, Nepal, and Cambodia. Her coverage has appeared in the Guardian, the Atlantic, Slate, and the Los Angeles Times. A native New Yorker, Amy received her master’s degree in politics and government from Columbia’s School of Journalism.