The number of poor people in east Asia will rise for the first time in 20 years as the result of the coronavirus pandemic, the World Bank warned on Tuesday, with up to 38m people set to remain stuck or be pushed back into poverty this year.
Without swift action by governments to liberalise their economies and increase social safety nets, the Washington DC-based development bank warned that the “triple shock” of Covid-19, lockdowns and the global recession would hamper growth and stoke poverty in years to come.
“Sickness, food insecurity, job losses and school closures could lead to the erosion of human capital and earning losses that last a lifetime,” the bank said in an update on east Asia and Pacific economies published on Tuesday.
Victoria Kwakwa, the bank’s vice-president for east Asia and the Pacific, said that Covid-19 was not only hitting the poor the hardest, it was creating “new poor”.
The bank said that 33m people who would have in the absence of the pandemic escaped poverty would remain in it this year. Another 5m people who were not considered poor would be pushed into poverty, the bank said.
“School closures due to Covid-19 could result in a loss of 0.7 learning-adjusted years of schooling in east Asia-Pacific countries,” the World Bank said. “As a result, the average student in the region could face a reduction of 4 per cent in expected earnings every year of their working lives.”
The multilateral lender said that if left unremedied, the consequences of the pandemic on east Asia’s economies and people could reduce regional growth over the coming decade by 1 percentage point a year.
The bank’s warning on the pandemic’s lasting impact on east Asia’s most vulnerable people follows other gloomy forecasts about the pandemic’s effect on what used to be one of the world’s fastest growing regions.
East Asian countries have largely managed to contain the pandemic, the bank said, leading to a revival of domestic economic activity.
However, Indonesia and the Philippines were still struggling with the disease, it said. Myanmar, one of Asia’s poorest countries, has experienced a recent surge in coronavirus cases.
East Asian countries, which traditionally spent little on social programmes, have devoted record sums to such projects since the pandemic began. Regional governments have committed nearly 5 per cent of their gross domestic product on public health and support for households and companies during the pandemic, the World Bank said.
“These countries were among the stingiest in terms of social protection,” Aaditya Mattoo, the World Bank’s chief economist for east Asia and the Pacific, told the Financial Times. “They spent less than 1 per cent of GDP, but they’ve been heroic,” he said.
Mr Mattoo said regional economies’ ability to bounce back would depend on further reforms, including phasing out of fuel subsidies, and the liberalisation of trade in services, which are widely protected in the region.
“That’s where trade is going,” he said. “Yet this region remains one of the most protected in services trade.”