Oct 5, 2022 - World

Economic shocks will undo years of progress for global poverty, World Bank says

Illustration of a hand squeezing a piggy bank.

Illustration: Aïda Amer/Axios

This year could be among the worst for global poverty reduction efforts, as high inflation and weak growth spur more hardship, according to new estimates by the World Bank.

Why it matters: A number of economic shocks have undone decades of progress in reducing global poverty. That progress, officials say, has stalled out, with potentially dour consequences for the world economy.

By the numbers: The biannual "Poverty and Shared Prosperity" report offers the first look at the pandemic's impact on global poverty — and the results are grim.

  • Roughly 70 million more people around the world fell into extreme poverty in 2020. That's the largest increase since the World Bank began keeping records in 1990. In all, about 719 million people were subsisting on $2.15 each day, the global extreme-poverty line.
  • Government spending and emergency fiscal measures helped buffer the pandemic shock. In high-income countries, the World Bank says, fiscal policies almost fully offset the pandemic's impact on poverty. Yet in the poorest nations, measures offset just a quarter of the impact.

Where it stands: Officials expected 2022 to be another rebound year for poverty reduction as the pandemic's effects waned. Now projections show there will be little to no improvement at the global level, as higher energy and food prices hammer the poor.

  • The backdrop of rising interest rates, a poor growth outlook and soaring prices make it more complex for governments to step in with measures that could help poverty reduction, the report says.

Catch up quick: A number of developments in the past two years — including the pandemic and fallout from Russia's invasion of Ukraine — have put the goal to eliminate global extreme poverty by 2030 further out of reach.

  • "If we had to make a projection right now, we won't reach the goal we set for ourselves by 2030. We won't reach it by 2100," Indermit Gill, the World Bank's chief economist, told reporters today.

Where it stands: Before COVID-19, the World Bank projected there would be 250 million extremely poor people around the globe by 2030.

  • Now officials expect that, with current trends, the figure will be 574 million (about 7% of the world's population), more than double the prior estimate.

What they're saying: "If you care about prosperity in advanced economies ... you want these countries to have large markets," Gill said. "You also want these countries to grow so they actually start to become sources of demand and not just supply."

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