(Bloomberg) — The COVID-19 shock is creating a class of ‘new poor’ across East Asia and the Pacific with 38 million more people expected to be living in poverty in 2020.
That’s according to a new report from the World Bank titled “From Containment to Recovery” that assesses the economic scarring caused by COVID-19 and prospects for recovery.
A triple shock of the pandemic, the economic fallout from containment measures and the impact of the global recession means the region will grow only 0.9% this year, its weakest expansion since 1967 — and poverty will increase for the first time in 20 years.
“The region is confronted with an unprecedented set of challenges, and governments are facing tough choices,” Victoria Kwakwa, Vice President for East Asia and the Pacific at the World Bank said in a release.
The report also finds:
Without action, the pandemic could reduce regional growth over the next decade by 1 percentage point per year with the greatest impact on the poorSchool closures could result in a loss of 0.7 learning-adjusted years of schooling, resulting in the average student in the region potentially facing 4% less in expected earnings every year of their working livesPublic and private indebtedness, along with worsening bank balance sheets and increased uncertainty, are risking investment and economic stabilityLarge fiscal deficits are projected to increase government debt on average by 7% of GDP in 2020The crisis is accelerating pre-existing trends in trade, including regionalization, a relocation of some global value chains away from China, and faster growth in digitally-delivered services, but also increasing pressure to revert to protectionism
“There are smart policy options available that can soften these tradeoffs – such as investing in testing and tracing capacity and durably expanding social protection to cover the poor and the informal sector,” Kwakwa said in the release.
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