COVID-19 pandemic to add 2.7M more poor people in 2020 — World Bank

The COVID-19 pandemic is estimated to add more than two million poor people this year resulting from reduced household income due to disruptions in economic activities amid quarantine restrictions to contain the disease’s spread, the World Bank said Tuesday.

Citing results of the latest Philippine Economic Update, World Bank senior economist Rong Qian said the “COVID pandemic is expected to slow down the pace of poverty reduction.”

“The containment measures have disrupted economic activity resulting in income loss, decline in wage incomes, a slowdown in entrepreneurial activities, and a fall in remittances,” Qian said at a virtual briefing.

“The poor and vulnerable are especially likely to experience significant welfare losses given their limited capacity to manage risks,” she said.

The World Bank said the economy will likely shrink by 8.1% this year due to “multiple shocks” that hit the country such as the COVID-19 health crisis, economic activities across the country frozen by quarantine measures, devastating typhoons in November, and the global recession. 

The lender’s latest economic projection for the Philippines is a revision from its -6.9% forecast last October.

With the economy contracting and household income declining this year, poverty is estimated to increase from 20.5% in 2019 to 22.6% in 2020.

“The expected growth contraction in 2020 is likely to increase poverty in the short-term, resulting in 2.7 million additional poor people in 2020 compared to 2019 estimates, measured against the lower middle-income poverty line of $3.2 a day,” Qian said.

Poverty incidence

Sought for comment, Socioeconomic Planning Acting Secretary Karl Chua agreed that “poverty likely went up in 2020 temporarily due to COVID and quarantine before starting to fall in 2021.”

The National Economic and Development Authority (NEDA) chief earlier said that the government’s initial target of reducing  poverty incidence to 14% by 2021 from P16.7% in 2018 will not be hit due to the COVID-19 pandemic. 

“As the threat of COVID-19 pandemic dissipates and business activities gradually return to normal, the economic recovery is expected to contribute to poverty reduction,” Qian said.

“The poverty rate is projected to fall to its 2018 level in 2021 and keep falling throughout 2022,” she added.

The World Bank projects the Philippine economy to rebound gradually by 5.9% and 6.0% in 2021 and 2022, “driven by the return to more robust economic activities assuming the infection curve flattens domestically.”

But the pace could be faster if a vaccine against COVID-19 will be widely available next year. 

“Key will be to open more of the economy to see income sources return,” Chua said in a text message.

The Philippines has been under lockdown for nearly nine months, after the first restrictions were implemented in March to curb the spread of COVID-19. A general community quarantine (GCQ) has remained in place in Metro Manila and other key areas, and just this week was extended to last until the end of the year. — RSJ, GMA News