Impact of Corona pandemic on poverty rates globally and locally

The Corona virus caused a global crisis unprecedented in decades in terms of its economic and social effects. Its effects exceeded the size of the effects documented by economists specifically in recent global crises, which include the Asian financial crisis in 1997, the Great Recession in 2008, and the Ebola virus outbreak in 2014.

These serious impacts can be tracked by monitoring the world’s poverty situation, after the pandemic, the global abject poverty rate increased to an estimated 9.3% in 2020, compared to 8.4% in 2019. A range from 667 to 685 million people is expected to live in abject poverty in 2022. This means that the numbers predicted before the coronavirus pandemic and the Russian-Ukrainian war increase from 70.5 to 88.8 million people, more than expected before the pandemic. This means that 2022 could be the worst year in poverty reduction efforts in the past two decades. (After 2020), which would undermine the gains made in 2021 to reduce poverty, foreshadowing the inability to achieve the first sustainable development goal to eradicate abject poverty and reduce the proportion of people living in poverty.

In the light of the foregoing, the Strategic Forum for Public Policy and Development Studies publishes a paper that monitors and assesses the effects of the coronavirus pandemic on the world’s poverty situation, as well as on Egyptian families, through the following themes:

First, the concept of poverty and ways of measuring it

Second: The impact of the coronavirus pandemic on global poverty rates

1. The world’s poverty rates before and after the pandemic.
2. Causes of high poverty rates as a result of the pandemic.

Third: International efforts to ease the coronavirus crisis on the poor.

Fourth: The impact of the pandemic on Egypt’s poverty rates.

1. Poverty rates in Egypt.
2. The impact of coronavirus on poverty rates in Egypt.

Fifth: The Egyptian state’s efforts to protect the poor during the pandemic

• The paper’s main findings are as follows:

1. The global abject poverty rate rose to an estimated 9.3% in 2020, up from 8.4% in 2019.

2-   The coronavirus pandemic has caused more than 70 million people to fall into abject poverty in 2020, compared to 2019.

3-   The global total of people living in poverty in 2020 has risen to over 700 million.

4-   Poverty decreased in 2021, but the pace of recovery from poverty was not strong enough to reverse the increase in 2020, and another 42.2 million people remain poor in 2021 compared to 2019.

5-   Between 70.5 million and 88.8 million people are expected to be added to abject poverty in 2022.

6-   The number of people living in multidimensional poverty is about 1.2 billion, 92% of whom live in developing countries.

7-   2020 saw the loss of an estimated 8.8% of the world’s total working hours, equivalent to 255 million full-time jobs.

8-   A global deficit in working hours is expected to be equivalent to 52 million full-time jobs.

9-   The number of unemployed people reached 207 million, compared to 186 million in 2019, and the numbers are expected to continue to increase in 2023.

10- Participation in the world’s workforce decreased by 2.2% in 2020.

11- The world’s income level declined in 2020 by about $3.7 trillion, representing about 4.4% of total global output.

12- The number of unemployed young people in the world is expected to reach 73 million in 2022.

13- Global inflation is expected to rise from 4.5% to 8.8% in 2022.

14- Egypt’s poverty rates fell to 29.7% during fiscal year 2019-2020, compared to 32.5% in 2017-2018, a decrease of 2.8%.

15- The unemployment rate increased in the second quarter of 2020, reaching 9.6% compared to 7.5% in the second quarter of 2019, and stabilized at 7.2%, 7.4% in the second and third quarters of 2022 respectively.

16- The annual inflation rate in 2020 fell to 5.1% compared to 8.5% in 2019, but the rate went back up in 2021 to 5.9% and continued to rise in 2022 to 16.2% in October.

First: the concept of poverty and ways to measure it

The World Bank and the International Monetary Fund define poverty as starvation, lack of basic clothing and coverings, basic health services, basic education, adequate housing, safe drinking water, and adequate work. These international financial agencies set basic criteria for measuring poverty, and the most important of these criteria was the level of income or the level of consumption.

The World Bank has modified the international poverty line more than once to keep pace with the development of differences in price levels across the countries of the world, and in 2022 the new global poverty line has become set at $ 2.15 per person per day using 2017 prices. This means that anyone lives on less than $ 2.15 per day is considered a person in abject poverty.

The line for the lower category of middle-income countries has also been adjusted from $3.20 per person per day to $3.65 and also the line for the upper category in middle-income countries was adjusted from $5.50 per day per person to $6.85, It can be explained that the impact of the coronavirus was not only on the $2.15 poverty line, but also on the $2.15 abject poverty line.

It should be noted that poverty can be measured in different ways by governments, international organizations and policy makers, considering that poverty is a multidimensional phenomenon that includes social, natural and economic factors. There are two ways to measure it: The first is the absolute poverty measure, which depends on determining a minimum level that an individual needs to meet his basic needs. Whoever has an income less than this limit is considered poor, noting that the minimum level is calculated according to the prices of basic goods and services that oblige the individual monthly. This method is used by international organizations by setting a daily minimum in US dollars for per capita income, as we mentioned earlier, and Egypt is also following it.

There are multiple indicators through which poverty is measured, the most recent is the United Nations Global Multidimensional Poverty Index which takes into account education, health and basic services such as water, electricity and sanitation, and then fully monitors the poverty situation and is not limited to measuring the size of income only.

Figure No. (1) shows the dimensions of the United Nations Global Multidimensional Poverty Index

Second: The impact of the Corona pandemic on global poverty rates

-1 Poverty rates in the world before and after the pandemic

The World Bank issued a report entitled “Shared Poverty and Prosperity for 2022”, in which it monitors poverty conditions in the world in the aftermath of the Corona pandemic and the Russian-Ukrainian war. Estimates included in the report indicate that the pandemic pushed about 70 million people into abject poverty in 2020, which is the largest increase in one year since poverty began to be monitored in the world in 1990.

Figure 2: Real-time forecasts of abject poverty at the global level, according to the new international poverty line ($2.15):

Figure (2) shows that poverty rates were declining until 2019, and expectations for the year 2020 before the pandemic were to continue to decline from 648.1 million in 2019 to 628 million in 2020, but after the pandemic it became 718.8 million, meaning that there were 70 million more people who lived in abject poverty in 2020 compared to 2019 – an increase of 12%, as it is estimated that the incomes of the poorest 40% of the world’s population will decrease by 4% in 2020.

The report stated if it weren’t for the pandemic, nearly 20 million people would have been out of abject poverty in 2020. That is why the net effect was that another 90 million people lived in abject poverty in 2020.

There are two global events that are still developing in addition to the continuing consequences of the pandemic, and are likely to have negative effects on poverty conditions, namely the widespread inflationary pressures and the war in Ukraine, as well as the effects of climate changes. That is why the World Bank report presented expectations related to an increase in poverty rates in 2022, as it stated that 667 million people are expected to live in abject poverty, and this number is equivalent to 70.5 million more than what was expected for 2022 before the pandemic.

2-The reasons for the increase in poverty rates as a result of the pandemic

After examining the poverty situation before and after the pandemic, it is possible to clarify how Corona affected poverty rates by knowing the labor market situation after Corona, as this affects income and, accordingly affects spending on goods, which pushes more people into abject poverty. This is evident through the following:

a-Loss of jobs and decline in income levels: Corona affected the standard of living directly, as many workers lost their jobs due to the precautionary measures taken by countries, and the consequent halt of many establishments from working completely, and there are establishments that reduced the number of workers, and thus it is possible to track the changes that occurred in the labor market and income are as follows:

-Impact on the labor market: The International Labor Organization confirmed that the year 2020 witnessed an estimated loss of 8.8% of working hours in the world (compared to the fourth quarter of 2019), equivalent to 255 million full-time jobs.

Here it should be noted that about 5% of women lost their jobs in 2020, compared to 3.9% for men. Also, 8.7% of young people (15-24 years) lost their jobs, compared to 3.7% for adults.

More than two years after the start of the pandemic and the distribution of vaccines, there were expectations of a significant recovery in the labor market, but the International Labor Organization, in its report “Employment and Social Prospects in the World: Trends 2022”, lowered its expectations for a recovery in the labor market in 2022, and expected a global deficit in working hours equivalent to 52 million full-time jobs compared to the fourth quarter of 2019.

-High unemployment rates: After the loss of jobs and the increase in the number of unemployed, the unemployment rate increased after the pandemic, and is still higher than it was before the pandemic, as the number of unemployed people reached 207 million, compared to 186 million unemployed in 2019, and it is expected to remain high until at least 2023.

-The impact on income: It is natural that the reduction in working hours or the loss of jobs is reflected in the income, and the cessation of labor migration caused a significant decline in remittances, which led to a decline in the level of income in many families, especially low-income, which depends heavily on money transfers from abroad.

The International Labor Organization estimated global income losses in 2020 at about $3.7 trillion, which is about 4.4% of global total output, as global labor income fell by 8.3% (before support measures are included).

b-High prices, especially food commodities:

Global food prices increased by 14% in 2020, as shown by the World Bank’s Food Price Index. Surveys conducted by the World Bank showed that a large percentage of people had run out of food or reduced their consumption.

c-Shortage of food commodities:

The United Nations Food and Agriculture Organization (FAO) and UNICEF regional report on Asia and the Pacific for 2021 concerning food security and nutrition indicated that more than 375 million people suffered from hunger in that region during 2020, an increase from about 321 million in 2019 due to the pandemic, in addition to the fact that more than a billion people were unable to obtain sufficient food in 2020.

D- High inflation rates:

The pandemic affected aggregate demand and led to a decrease in consumer spending, especially non-essential goods. Therefore, the global inflation rate decreased to 3% in 2020, compared to 3.6% in 2019, but with the recovery and return of the rise in demand in addition to the increasing crises such as those resulting from Russian-Ukrainian war and the continuing consequences of the pandemic. These rates are expected to rise from 4.7% in 2021 to 8.8% in 2022, to decline later to 6.5% in 2023 and 4.1% in 2024. These rates, even with the expected decrease in 2023 and 2024, are considered high compared to 2019.

f-Disruption of healthcare and education services:

Health care disruption:

The Corona pandemic has resulted in widespread disruption in the provision of basic health services, and has pushed more than half a billion people into abject poverty due to having to pay for health services out of their own pockets.

A survey of 155 countries conducted by the World Health Organization from May to July 2020 showed that services for the prevention and treatment of no- communicable diseases have been significantly disrupted since the start of the COVID-19 pandemic.

Education disruption:

1.6 billion children in the world have been affected by the Corona pandemic, due to the closure of schools for long periods and poor learning outcomes, and according to a report published by 8 international institutions entitled “The State of Learning Poverty in the World,” which revealed a high rate of learning poverty by a third in low- and middle-income countries, as well as inability of 70% of children at the age of ten to understand a simple written text, and this percentage was 57% before the Corona pandemic.

Third: International efforts to alleviate the Corona crisis for the poor

In light of this impact, efforts have been made to make the effects less aggravating. The fiscal responses mobilized by countries around the world in the form of cash transfer programs, wage subsidies, unemployment benefits, and other measures have reduced the impact of the COVID-19 pandemic on poverty conditions. Without these responses, the situation would have been much worse. The fiscal response to the pandemic until September 2021 amounted to more than $17 trillion or 20% of global GDP in 2020.

From the start of the pandemic until June 2022, the World Bank Group has invested more than $157 billion to combat the health, economic and social impacts of it, which is the fastest and largest response to any crisis in its history.

Despite the efforts made, the Corona pandemic undermined efforts to combat poverty in the world and caused a major setback from which many low- and middle-income countries have not been fully recovered, especially after food and energy prices witnessed a significant increase after the Russian-Ukrainian war, which made the return to achieve progress in poverty reduction efforts is more difficult as the world deviates further from its path towards ending abject poverty by 2030.

Fourth: The impact of the pandemic on poverty rates in Egypt

The Central Agency for Public Mobilization and Statistics determines the percentage of the poor based on its definition of material poverty as “the inability to provide the minimum basic needs for an individual or a family, and basic needs are food, housing, clothing, education, health and transportation services.” Extreme poverty is defined as the inability to spend on food alone (the cost of living).

According to the estimates of the Public Mobilization and Statistics Agency, the value of the national poverty line per capita in 2019-2020 amounted to about 10,279 pounds per year, or 857 pounds per month and the value of the abject poverty line per capita reached 6,604 pounds, or 550 pounds per person per month.

1. Poverty rates in Egypt:

The latest official data on poverty is available in the Income, Expenditure and Consumption Survey issued by the Central Agency for Public Mobilization and Statistics in December 2020. The following figure shows poverty rates in Egypt:

Figure (3) Evolution of the ratio of (population below the national poverty line) to the total republic during the period from 1999/2000 to 2019/2020

Source: Central Agency for Public Mobilization and Statistics

The graphic shows that poverty rates declined to 29.7% during the fiscal year 2019-2020, compared to 32.5% in 2017-2018, with a decrease of 2.8%.Abject poverty rates also declined to 4.5% in 2019-2020, compared to 6.2% in 2017-2018. As shown in Figure (3)

Figure (4) the evolution of the proportion of the poor (the population below the abject poverty line) during the period from 1999/2000 to 2019/2020

Source: Central Agency for Public Mobilization and Statistics

Central Agency for Public Mobilization and Statistics indicated that the percentage of the poor increases with the increase in the size of the family, as about 80.6% of individuals who live in families with 10 or more members are poor, and 48.1% of individuals who live in families with 6-7 poor members compared to 7.5% of families with less than 4 members.

The level of education is one of the factors most associated with poverty risks. Poverty indicators decrease as the level of education rises. The proportion of the poor among illiterate people is about 35.6%, compared with 9.4% of those who obtained a university degree in 2019-2020, 15.2% of those who held above average degrees, 17.4% of those who received a secondary degree and 33.1% of those who received a basic education degree in 2019-2020.

2. Corona’s impact on poverty rates in Egypt:

The Central Agency for Public Mobilization and Statistics in Egypt indicated that more than half of the employed individuals, about 55.7%, have become working fewer working days or fewer working hours than usual for them, and 26.2% of the individuals are unemployed, and 18.1% are now working intermittently.

In a recent report, the agency indicated that about a quarter of individuals have stable income since the emergence of the virus, while the majority of individuals, about 73.5%, reported that income has decreased, and less than 1% reported that income has increased.

The impact of Corona on poverty rates can be explained through the following:

1. Labor market:

– The unemployment:

The unemployment rate increased in the second quarter of 2020 and reached 9.6% compared to 7.5% in the second quarter of 2019, but the rates started to decline after that.

– Work’s strength:

The labor force in Egypt in 2019 reached an estimated 28.1 million individuals, and as a result of the pandemic, the labor force decreased in the second quarter of 2020 to 26.689 million individuals, compared to 29.008 million in the first quarter of 2020, then it increased to end the year with a workforce of 28.458 million people, and the increase continued to reach 29.358 million people in 2021, an increase of 900 thousand people.

The number of unemployed:

The number of the unemployed reached 2.259 million in 2020 (1.413 million unemployed males and 846 thousand unemployed females), compared to 2.225 million unemployed in 2019, with an increase of 34 thousand unemployed by 1.5%. The percentage of the unemployed who had previously worked reached 58.3% of the total unemployed, while it was 31.3% in 2019.

The number of the unemployed reached 2.170 million in 2021, 1.359 million unemployed males and 811 thousand unemployed females, thus the number of unemployed decreased from 2020 by 89 thousand unemployed, or by 3.9%, and the percentage of the unemployed who had previously worked reached 52.5% of the total unemployed, while it was 58.3 % in 2020.

2-Inflation:

Despite price instability and disruption in supply chains following the pandemic, the annual inflation rate fell in 2020 to 5.1% compared to 8.5% in 2019, the rate returned to rise in 2021 to 5.9% and continued to rise in 2022 to 16.2% in October. This is due to the continuing impact of the pandemic and the Russian-Ukrainian War on Egypt’s economy.

Figure (5) shows inflation rates in the last two months of 2021 and rates from January to October 2022:

Source: Central Agency for Public Mobilization and Statistics

3-Per capita GDP:

The per capita GDP in Egypt increased to 3.83 thousand dollars in the fiscal year 2021, which is an increase of 6.8% compared to 3.58 thousand dollars in 2020 and 3.01 thousand dollars in 2019, as shown in Figure (6):

Source: World Bank, International Monetary Fund

Fifth: State efforts to protect the poor during the pandemic

The Egyptian state took a number of decisions during the Corona pandemic to protect the poor, and the move served poverty in its various dimensions, as follows:

1. Disbursement of grants for irregular workers affected by the Corona pandemic, at a value of 500 pounds monthly per person.
2. The state has expanded the number of beneficiaries of cash support programs by adding nearly 160,000 new families during the pandemic to the Takaful and Karama program, in addition to increasing the number of beneficiaries of soft and simple-interest loans to create micro-projects to improve the standard of living of families.
3. Supporting the health sector, improving the conditions of workers in the sector, doctors, and nursing staff, and equipping hospitals for isolation in each governorate so that they are technically and administratively equipped, in terms of the availability of medical devices, sterilization, medical staff, nursing and medical supplies, and a section has been allocated in each hospital with reception and emergency rooms for upcoming cases to detect or suspect them before deporting the positive ones to the main isolation hospital in each governorate.4- Granting an employee who is pregnant or caring for a child under the age of twelve Gregorian years, or caring for one of her children with special needs, an exceptional leave.5- Providing vaccination services against the Corona virus in vaccination centers spread across the governorates and vaccination has begun with the most dangerous and most vulnerable groups.

   6- Launching awareness campaigns for citizens to guide and provide the necessary information about the Corona virus, through various media and social media.

   Finally, the paper shows that the impact of the pandemic is far-reaching and affects every possible area of development, and with the poorest and most in need of the pandemic, poverty reduction efforts are facing significant and sustained setbacks, foreshadowing the world’s derailment away from achieving the goal of eradicating extreme poverty by 2030. Despite Egypt’s efforts to reduce poverty, the continuing consequences of the pandemic and other crises make it difficult to reach the hope of the poverty-related sustainable development goals