World Bank warns 60 million could be pushed into extreme poverty
JOHANNESBURG - The World Bank yesterday warned that 60 million people globally could be pushed into extreme poverty this year due to the coronavirus pandemic.
The lender said in a snippet of Global Economic Prospects report that Covid-19 would be particularly devastating with lasting scars on the developing world.
World Bank president David Malpass said the pandemic would affect countries with weak health systems and reliant on global trade, tourism, or remittances from abroad, and those that depend on commodity exports.
Malpass said the deep recessions associated with the pandemic were likely to exacerbate the multi-decade slowdown in economic growth and productivity.
“The scope and speed with which the Covid-19 pandemic and economic shutdowns have devastated the poor around the world are unprecedented in modern times,” Malpass said.
“Current estimates show that 60million people could be pushed into extreme poverty in 2020. These estimates are likely to rise further, with the reopening of advanced economies the primary determinant.”
The bank recommended that policies be put in place to rebuild both in the short- and long-term should entail strengthening health services and putting in place very targeted stimulus measures to help reignite growth.
It said the measures should include efforts to maintain the private sector and get money directly to people and an orderly allocation of new capital toward sectors that are productive in the new post-pandemic economy.
South Africa’s R500billion fiscal and monetary economic recovery stimulus package, or 10percent of the country’s gross domestic product (GDP), has been touted as a significant government intervention to the crisis.
In April, the government said the poor may find it more difficult to recover from the outbreak, due to lower accumulated savings, the impact of funeral costs and loss of breadwinner income.
The country has further eased the lockdown restrictions to allow for the reopening of the economy, since activity ground to a halt at the end of March.
Economic growth is expected to contract between 7 and 16percent this year in the country, as activity ground to a halt in April.
Prescient Investment Management yesterday outlined a set of potential scenarios on how long it would take to return to the pre-corona GDP peak once the economy has hit bottom.
Prescient’s Bastian Teichgreeber said their base case was a U-shaped recovery in which losses incurred in the first two quarters of 2020 would be recovered within two years.
“This might sound pessimistic to some and optimistic to others. The risks to our view are significant on the up and the downside,” Teichgreeber said.
“We do, however, remain optimistic. A crisis can be the mother of invention. The coronavirus shock is likely to spur innovation in many fields. In the long run, the resulting jolt to productivity may be more profound than the drags.”