COVID-19 Will Push More Than 34 Mn People into Extreme Poverty This Year: UN Report

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Addis Ababa, May 14/2020(ENA) The Coronavirus pandemic will likely cause an estimated 34.3 million people to fall below the extreme poverty line in 2020, with 56 percent of this increase occurring in African countries, according to United Nations World Economic Situation and Prospects (WESP) mid-2020 report released today. 

An additional 130 million people may join the ranks of people living in extreme poverty by 2030, dealing a huge blow to global efforts for eradicating extreme poverty and hunger.

The report noted that the pandemic, which is disproportionately hurting low-skilled, low-wage jobs, while leaving higher-skilled jobs less affected – will further widen income inequality within and between countries.

Facing an unprecedented health, social and economic crisis, governments across the world have rolled out large fiscal stimulus measures - equivalent to an estimated 10 per cent of GDP, to combat the pandemic and minimize its livelihood impacts, it said, adding that the depth and severity of the crisis however foreshadows a slow and painful recovery.

Many developing countries face severe fiscal constraints as most developing economies – saddled with chronic fiscal deficits and already high levels of public debt – are finding it very hard to implement sufficiently large fiscal packages, which have thus far averaged less than 1percent of their GDP, the reported stated.

Falling exports and growth are rapidly undermining the debt sustainability of many developing countries,    particularly those that are heavily dependent on commodities, tourism revenues or remittances.

According to the report, growing debt distress poses an enormous challenge to these countries, further constraining their ability to implement much-needed stimulus measures. Stimulus measures must boost productive investments.

The report cautions against the risk of large fiscal and monetary stimulus measures – with trillions of dollars of new liquidity injected into the financial system – contributing to the quick recovery of equity and bond prices, while ignoring productive investments.

Assessing the impact of the virus on the global economy, the report pointed out that the economy is projected to contract sharply by 3.2 per cent this year.

The global economy is expected to lose nearly 8.5 trillion USD in output over the next two years due to the COVID-19 pandemic, wiping out nearly all gains of the previous four years, it said.

The sharp economic contraction, which marks the sharpest contraction since the Great Depression in the 1930s, comes on top of anemic economic forecasts of only 2.1 percent at the start of the year. 

The report estimates that GDP growth in developed economies is expected to plunge to -5.0 percent in 2020. A modest, 3.4 percent growth – barely enough to make up for the lost output – is expected in 2021.

World trade is forecast to contract by nearly 15 per cent in 2020 amid sharply reduced global demand and disruptions in global supply chains. Nearly 90 per cent of the world economy has been under some form of lockdown, disrupting supply chains, depressing consumer demand and putting millions out of work.

The report underscores the existence of a window of opportunity for “recovering better”, with renewed global solidarity enhancing public health systems, building resilience to withstand economic shocks, improving social protection systems worldwide, greening of economies and addressing climate change.

Ethiopian News Agency
2023