Middle-income countries at risk of dramatic increases in poverty, report finds

LONDON — Poverty could dramatically increase in middle-income countries amid “a significant change in the distribution of global poverty” sparked by the coronavirus pandemic, new research suggests.

More than a billion people worldwide could be thrown into poverty in the most extreme scenario forecast by researchers from King’s College London and the Australian National University.

The paper, published Friday by the United Nations University, predicts “there will likely be a dramatic spike in poverty rates in some of the middle-income countries that have made significant progress [against poverty] in recent years.”

The researchers analyzed the impact of potential economic contractions of 5%, 10%, and 20% on the World Bank’s extreme poverty line of $1.90 per day, and higher poverty lines of $3.20 and $5.50 — the average poverty lines respectively for low-, lower-middle- and upper-middle-income countries.

“Things are much more fragile than they first seem,” co-author Andy Sumner, professor of international development at King's College London, told Devex. “People haven’t jumped from poverty into a secure lifestyle; they are not that far away from poverty, and the current crisis could be that one shock that pushes them into poverty.”

It is not yet known how much the global economy will contract as a result of the pandemic, but India would be among the worst-hit countries under any scenario, according to the report, which says it is home to nearly half of the people likely to be made poorer by the effects of the coronavirus.

Outside of sub-Saharan Africa — where poverty has been concentrated in recent years — Bangladesh, Pakistan, the Philippines, and Indonesia would also see large numbers of people newly pushed into poverty.

The estimates showed that other middle-income countries, such as Brazil and China, could also see poverty increases based on the $5.50 poverty line.

In Africa, poverty is predicted to rise in the Democratic Republic of the Congo, Tanzania, Kenya, Uganda, Ethiopia, and Nigeria.

“Our estimates show that poverty is likely to increase dramatically in middle-income developing countries and there could be a significant change in the distribution of global poverty,” the report stated.

It continued: “There could be much more new poverty not only in countries where poverty has remained relatively high over the last three decades and also in countries that are not among the poorest anymore, which points not only to their population size, but also suggests that much of their previously poor people moved to just above the poverty line, thus implying that the recent progress they achieved has been relatively fragile.”

Sumner said the dramatic shifts were not inevitable. “The actual poverty impacts will be determined by what governments do to mitigate the damaging consequences of the pandemic,” he said. “The world’s poorest can’t wait until the G-7 meet in September or the G-20 meet in November; global leadership is needed now.”

The researchers are planning to follow up on their predictions with a three-point plan addressing the effect on poverty.

Professor Kunal Sen, director of UNU’s World Institute for Development Economics Research,  said: “These new estimates about the level of poverty in the world and the cost of the COVID-19 pandemic to the world’s poor are sobering. We cannot stand by and see the hard work and effort of so many be eradicated. We will know what the real impact is in time, but the necessary action to ensure we achieve the Sustainable Development Goals by 2030 needs to be planned now.”