The COVID-19 pandemic was accompanied by disrupted supply chains, a hike in commodity prices and inflation, increased public and private debt, and reduced economic output. Despite secular trends toward its eradication, income poverty (see here and here) suffered an increase in 2020 because of transitory conditions. Our recent research highlights an increase in “extreme poverty” by 115 million people in 2021 because of the COVID-19 effects (Figure 1). We observe a dramatic increase in poverty headcount in our COVID-19 counterfactual calculations using other poverty lines and extending the forecasting horizon from 2021 to 2030. Results on extreme poverty discussed here and here show a consensus on the direction and magnitudes of the impact of COVID-19 on headcount levels by 2021.

COVID-19 had another impact on poverty. Given the uncertainty around the future of the pandemic and the global economy, COVID-19 increased the number of people at risk of falling into poverty. We simulated the evolution of poverty in developing countries by considering the uncertainty around global economic growth and commodity prices and country-specific factors such as income distribution. Figure 2 shows the uncertainty embedded around global extreme poverty across time horizons.

We then define the poverty-vulnerable population as those who are between the average and the 99.5 percentile of simulated poverty headcount trajectories. The COVID-19 pandemic increases the poverty-vulnerable population across all the studied poverty lines (Figure 3). We call our measure “macro-poverty vulnerability” to distinguish it from other measures of poverty vulnerability—Dang and Lanjouw (2017) and Lopez-Calva and Ortiz-Juarez (2014).

Read the full article about poverty vulnerability by Fabian Mendez Ramos and Jaime Lara at Brookings.