The pandemic’s ‘new poor’: Poverty in parts of Asia could rise for the first time in 20 years

September 29, 2020, 11:27 AM UTC

The coronavirus pandemic could push 38 million people into poverty across East Asia and the Pacific as the region’s collective economy grows at its slowest pace in 50 years, according to the World Bank.

“COVID-19 is not only hitting the poor the hardest, it is creating ‘new poor.’ The region is confronted with an unprecedented set of challenges, and governments are facing tough choices,” said Victoria Kwakwa, vice president for East Asia and the Pacific at the World Bank.

According to the World Bank’s most recent report on the region’s economy, published Tuesday, China can expect to see positive economic growth this year—with GDP rising 2%. The country has managed to largely contain the COVID-19 outbreak and has restarted its economic engines by reopening factories and funneling government funding into infrastructure.

Other countries across East Asia haven’t endured the pandemic so well, particularly those where tourism is a key growth engine. The World Bank predicts the region (excluding China) will see GDP contract, on average, 3.5% this year, putting millions of people in poverty.

Prior to the pandemic, 33 million people across the region were expected to escape poverty this year, with “poverty” defined as an average income of $5.50 per day. The coronavirus has eliminated those potential gains and threatens to put an additional 5 million people below the threshold, marking the first time in 20 years that poverty in the region has grown.

Total poverty in China is expected to decline this year, albeit by less than the World Bank had predicted before the pandemic began. In 2015, China President Xi Jinping set the ambitious target of eliminating “extreme poverty” in China by 2020, with extreme poverty defined as subsisting on less than $1.10 per day.

Under pressure from the pandemic, Xi has pushed the deadline for his campaign to July next year—the 100th anniversary of the Chinese Communist Party—but critics question the campaign’s total efficacy.

In some of China’s regions, poverty alleviation schemes have reportedly led to forced labor. In other towns, local governments have relocated poor residents to new buildings in higher-income areas but have provided few measures to ensure the people can earn a higher income.

The long-term impacts of the pandemic could mean those who fall into poverty this year remain there for a long time too. The World Bank warns “sickness, food insecurity, job losses, and school closures [will lead] to the erosion of human capital and earning losses that last a lifetime.”

According to Aaditya Mattoo, chief economist for East Asia and the Pacific at the World Bank, economies in East Asia and the Pacific should focus on “safe schooling to preserve human capital; widening narrow tax bases to avoid cuts in public investment; and reform of protected service sectors to take advantage of emerging digital opportunities.”

That’s advice developed economies could follow too.