Coronavirus could push 160 million more into poverty in Asia, ADB warns

Without the coronavirus pandemic, the number of poor people in developing Asian countries would have continued to decline in line with the experience of the past two decades.

The number of people living in poverty, defined as living on no more than $ 1.90 a day, would have fallen to 114 million by the end of 2020, while using $ 3.20 as the poverty line, the number would have been reduced to 734 million.

But the coronavirus reversed this trend, and the ADB now estimates that the number of poor people in the region is likely to rise to 192 million by the end of 2020 using the $ 1.90 poverty line, or to 896 million using the poverty line. of US $ 3.20. .

This means, depending on the definition of poverty, 78 million or 162 million more people, reversing the reduction in poverty achieved in the last three or four years.

The poorer segments of society, including the self-employed in the informal economy, are more vulnerable to the pandemic because they cannot earn an income working from home as administrative employees can, Sawada added.

Additionally, micro and small businesses and industries, particularly in South Asian countries, are also disproportionately affected because liquidity constraints may prevent them from continuing to operate during the blackout period or when their operations have been suspended, Sawada explained.

“So inevitably [these businesses] they have to fire their employees, ”Sawada said. “The working poor, informal workers and small businesses are affected [the most]Sawada said.

Developing Asian economies will contract this year for the first time in nearly six decades, and about three-quarters of the region’s economies are expected to post negative growth in 2020.

Next year’s recovery will be below pre-Covid-19 projections, suggesting an L-shaped recovery, Sawada said.

The ADB forecasts that overall gross domestic product growth for Asian developing countries will contract by 0.7% this year, marking its first negative economic growth since 1962. Growth is forecast to pick up at 6, 8% in 2021, but this will still leave GDP next year. Substantially below expectations before Covid-19.

Thus, the region’s growth will see a weak L-shaped recovery rather than a strong V-shaped rally, the ADB said.

The landscape across the region is mixed, and the path and speed of economic recovery depend on successful control of the pandemic. In particular, the region’s two largest economies are diverging, as the onset of recovery in China contrasts with continued fragility in India.

China contained its domestic outbreak relatively quickly, while the outbreak in India has intensified since April, spreading rapidly from cities to rural areas.

However, India’s GDP is forecast to fall by 9% in 2020 and increase by 8% in 2021.

A protracted Covid-19 pandemic remains the biggest downside risk to the region’s growth prospects this year and next. Other downside risks come from geopolitical tensions, including an escalation of the trade and technology conflict between the United States and China, as well as financial vulnerabilities that could be exacerbated by a prolonged pandemic.

In addition, China has met only 48 percent of the phase one deal’s purchase targets since July, and a second phase deal on structural reforms seems unlikely this year.

“So the friction between the United States and China not only in trade but also in technology seems to be a bit worrisome,” Sawada said. “This is another element that tips downside risks for the Asia-Pacific economies.”