Extreme poverty projected to drop to 4.9 percent by 2030

There seems to be much to celebrate on the 22nd International Day for the Eradication of Poverty: Over the past two decades, extreme poverty has dropped significantly from 35.4 percent of the global population to just 16.3 percent. The World Bank, however, has set an ambitious target: Reduce the share of people living on less than $1.25 a day to 3 percent by 2030. But its latest projections only expect the poverty rate to slide down to 4.9 percent by 2030. The bank’s recent Global Monitoring Report further paints a more complex picture of this estimate. In 1990, three regions were home to the largest numbers of poor people: East Asia and the Pacific, sub-Saharan Africa and South Asia. Among them, East Asia and the Pacific and South Asia experienced accelerated growth and emerged as new centers of economic activity in the two decades that followed. But they also became hotbeds of inequality as the gap between the rich and the poor in these regions continued to widen. Sub-Saharan Africa’s poverty reduction trajectory from 1990, meanwhile, has been more sluggish. The region was the second-poorest part of the world next to East Asia and the Pacific in 1990, and the extent of poverty in the region has been more stubbornly entrenched. In fact, the World Bank projects the poverty rate in the region to stand at 23.6 percent by 2030, a significantly high share that skewed global estimates. Room for growth The vast difference between the 2030 projections for East Asia and the Pacific and South Asia, as well as sub-Saharan Africa shows the importance of economic growth in curbing poverty. “These regions [East Asia and South Asia] happen to be growing rapidly at the moment, and this implies that their overall share of global poverty will decline fairly rapidly in the near future,” Dean Jolliffe, senior economist of the World Bank’s development research group, told Devex. “What poverty remains will likely become increasingly concentrated in sub-Saharan African countries where economic growth has not been as rapid in recent years.” Unless economic growth patterns change, however, ending extreme poverty — or even meeting the bank’s 3 percent target — by 2030 will be unlikely. According to World Bank estimates, assuming the income distribution in each country won’t change, annual per capita consumption needs to grow 4 percent to meet the 3 percent target. But even in this scenario, sub-Saharan Africa would still have a 19 percent poverty rate by 2030, and five of the six countries that would have poverty levels above 30 percent that year — Burundi, the Democratic Republic of the Congo, Haiti, Madagascar, Malawi and Zambia — would come from the region. Focus on the bottom 40 percent Clearly, economic growth is not enough to end extreme poverty, and in many developing countries, it has even contributed to wider inequality. Another World Bank goal — making growth more inclusive by promoting shared prosperity among the bottom 40 percent of developing countries — reflects these realities. The income growth of the bottom 40 percent — a subset of the population that can span several income groups, from those living on less than $1.25 a day to those who earn up to $10 a day — differs across countries. According to the World Bank, from 2006 to 2011, those belonging to the bottom 40 percent enjoyed faster income growth than the income growth average in 58 of 86 countries. There is, however, considerable variation: Over the same period, the bottom 40 percent in 13 countries enjoyed annual growth rates of more than 7 percent, while those in 18 countries saw a reduction in income growth. World Bank projections are also vulnerable to several risks, such as climate change-related calamities, persistent unemployment, conflict in the Middle East and Eastern Europe, and the Ebola epidemic in West Africa. These inequalities and risks call for greater investments in human capital, social safety nets and more environmentally sustainable development efforts, according to the report. Early interventions — particularly in health and education — can have ripple effects throughout a child’s life. Immunization and deworming programs, according to the World Bank, have benefit-to-cost ratios of as high as 20-to-1 and 6-to-1, respectively, making them good investments for governments, donors and beneficiaries themselves. Poor nutrition at a young age, after all, can have a long-term impact on both educational attainment and future income. Easing the transition from primary school to secondary school or a technical or vocational school, enabling young people to gain marketable skills and investing in lifelong learning are just some ways to bridge the education gap between the bottom 40 percent and the top 60 percent. Unfortunately, in several low- and middle-income countries with high rates of poverty among the youth, these kinds of early childhood development programs are not so common, the World Bank noted in the report. In conflict-affected countries, these needs could even be magnified. “Donor countries might be well-advised to think in particular about ways in which they can support development efforts in governments with acute resource needs and administrative constraints,” Jolliffe said. Check out more practical business and development advice online, and subscribe to Money Matters to receive the latest contract award and shortlist announcements, and procurement and fundraising news.