We know the economic impacts of COVID-19 have been severe. Advanced and developing countries alike have experienced massive job losses, economic contraction, falling investments and exports, and declining tourism dollars. The impact of COVID-19 on poverty, however, is less clear. We typically get poverty estimates from household survey data, which have been difficult to carry out during the last year. Thus, it may be a year or two before the full impact of the pandemic is known. However, we do know that economic growth is the largest driver of poverty reduction. Conversely, economic recessions drive a rise in poverty, other things being equal. Yet other things were not equal in 2020. Countries responded to the pandemic with large social spending programs to mitigate the worst of the economic shock and keep families afloat. Advanced economies provided trillions of direct and indirect fiscal support, equivalent to 28 percent of their GDP. Emerging and developing economies spent 7 percent and 2 percent of GDP respectively. The World Bank estimates that in March 2020, there were 103 active social protection programs in 45 countries. This number jumped to 1,414 programs in 215 countries by December 2020. These measures likely kept many families from falling back into poverty.

We can be more confident about the long-term impacts of COVID-19. The pandemic, all else being equal, might lead to a temporary rise in poverty in some places before returning to its pre-COVID trajectory as growth rates rebound in 2021 and 2022. In other places, however, growth was low pre-COVID-19 and is predicted to be low for the next decade. In these countries, governments also had less fiscal space for mitigating policy response measures. Using long-term GDP growth projections from the International Monetary Fund (IMF), we estimate where poverty will likely be concentrated in 2030, and what we can do to reverse these trends.

Read the full article about extreme poverty by Homi Kharas and Meagan Dooley at Brookings.