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Protecting people and investing in development

Date: 2020-10-01

In less than a year, the Corona virus, which causes the "Covid-19" disease, has changed the face of the world. It is clear that the pandemic will remain with us for a long time, causing significant damage on more than one level - the economic impact being the most serious. The whole world must rearrange its priorities while waiting to emerge from the darkness.
We have seen governments around the world respond to the health and economic crisis relatively quickly, but in largely uncoordinated ways. This is not surprising because the perception of the problem differs in different cultures and political systems. There were two approaches to dealing with the epidemic, the first by making the priority to reduce the economic damage by allowing the virus to spread without real deterrence, despite the pressure caused on the health system. As for the second, it required the adoption of a deliberate slowdown of economic activity in order to contain health risks, and this approach included closing borders, social distancing, and self-quarantine.
It is worth noting that the weak economic immunity is partly caused by the fact that the global economy took a severe blow 12 years ago and has barely been rid of the last repercussions when the Corona epidemic came to unleash an unprecedented storm. In addition, the new recession occurred in light of a fierce trade war between the United States and China that affected the world from end to end.
For all this, regardless of the approach adopted in the face of the epidemic, we see that we are struggling in the midst of the deepest recession over the past 150 years, with the exception of the years of war from this period. All reliable economic forecasts, from the World Bank indicators to the numbers of the Organization for Economic Cooperation and Development, show that the impact of Corona is devastating in all corners of the globe, with little disparity between one country and another.
Everyone talks about numbers, losses in budgets and ratios, in global and international income declines, rates of recovery and growth, closing and opening dates, waiting for movement to return to the world's economies.
But what about poverty, unemployment, famine, and human capital indicators?
In a previous article, we had estimated that the outbreak of the Coronavirus is causing between 40 and 60 million people to fall into extreme poverty. Since then, the epicenter of this pandemic has shifted from Europe and North America to the Southern Hemisphere. This has resulted in an increase in the number of deaths from low and middle-income countries throughout the lockdown period. Consequently, our estimates of the impact of this virus on global poverty rates have also changed.

Using the newly released growth forecasts in June and included in the Global Economic Prospects report, we can update the estimates of the impacts of this pandemic on global poverty rates, and put the new growth forecasts according to two scenarios - a baseline and a deteriorating scenario, allowing us to explore two different scenarios for how this affects Pandemic affects poverty rates. The basic scenario assumes the continuation of the outbreak of this virus at the currently expected levels and the recovery of activity later this year, while the scenario of deteriorating conditions assumes the continuation of the outbreak for a longer period than expected, forcing countries to maintain or re-apply the closure measures. If the second scenario is realised, the most affected companies will exit the market, households will sharply reduce their consumption, and many low and middle-income countries will be exposed to severe financial pressure. The first scenario predicts a contraction of the global growth rate by about 5% in 2020, while the second scenario expects this contraction to reach 8% in the same year.

Using the same method that we mentioned in the previous article, we estimate the impact of the Corona virus on poverty rates by comparing poverty projections that use the new estimates of GDP to those that are based on estimates of GDP before the outbreak of this pandemic, and in light of this scenario we expect the Corona virus to lead to 71 million people falling into extreme poverty based on the international poverty line, which is $ 1.90 per person per day, and in the case of the deteriorating situation scenario, this number will increase to 100 million.

Cash remittances of expatriates and  migrants are expected to decrease by 20% on average this year, bearing in mind that the value of remittances exceeded the value of international aid to countries affected by conflict and violence last year, these remittances are a major lifeline for many of the poorest societies in these environments.

The Coronavirus pandemic threatens the improvements in health and education seen over the past decades, especially in the world's poorest countries. Investment in human capital - the knowledge, skills, and health that people accumulate over the course of their lives - are the basis for unlocking the potential of every child and increasing economic growth in every country.
The Human Capital Index 2020, developed by the World Bank Group, includes data on health and education in 174 countries covering 98% of the world's population, in March 2020, providing a pre-pandemic baseline on children's health and education. The analysis shows that most countries made remarkable progress in building the human capital for children before the outbreak of the pandemic, with the largest jumps in low-income countries. Despite this progress, and even before the spread of the Covid-19 virus, a child born in a country can expect to achieve only 56% of the potential of its human capital.