ADB statisticians Arturo Martinez and Joseph Bulan answer questions about how the pandemic has affected poverty in Asia, based on their research for Key Indicators for Asia and the Pacific 2022.
The Asia Pacific region has the world’s most impressive record of poverty reduction, with hundreds of millions of people lifted out of poverty in the last two decades. The pandemic has threatened those gains.
Almost all countries in Asia and the Pacific reported stronger growth in 2021, compared to 2020. Some suffered substantial economic loss in 2020 but managed to grow in 2021, undoing economic losses posted a year earlier. However, in most economies, the pace of growth in 2021 was not enough to undo the losses in 2020. Such diverse variations in economic growth paths point to widening inequality between economies.
It is important to remain on guard about the pace and sustainability of recovery. The potential for stagflation, ongoing global conflict, looming threats of food security, and energy price shocks may yet threaten the return to economic prosperity.
For the first time in several decades, global poverty reduction was interrupted in 2020. In Asia and the Pacific, the pandemic pushed millions of Asians into poverty and set back poverty relief estimates by years. In particular, conservative estimates suggest that in 2020, the proportion of the region’s population living in extreme poverty was 5%. This is 1.7 times higher than what extreme poverty rates would have been in 2020 had the pandemic not happened.
As more economic activities resumed in 2021, the region’s economies were generally better able to reduce poverty. Estimates suggest that approximately 3.8% of people in the region lived in extreme poverty while 21.8% lived in moderate poverty in 2021.
However, the prevalence of poverty may even be higher when other aspects of life other than money are taken into account, with estimates suggesting that the pandemic’s influence could be much more severe.
Social mobility is the ability of people to move from poverty to greater prosperity, or vice versa, within a society.
There is evidence from pre-pandemic data that areas with higher levels of social mobility experienced generally faster reductions in poverty. With more equitable distribution of economic opportunities, those born into lower social classes can more easily reach higher status as their prospects are not strongly anchored to their initial socioeconomic status.
During crises such as a pandemic, drivers of upward social mobility (e.g., human capital investments, credit markets, public investments, etc) may be severely disrupted. While the better-off may be able to mitigate adverse impact of shocks, the less well-off are unable to do so. Hence, structures of disadvantage may start crystallizing, making it more difficult for poor and socioeconomically vulnerable people to exit the cycle of disadvantage.
Nonetheless, despite setbacks caused by the pandemic, simulations show that if economies in our region can revert to pre-pandemic growth prospects, it is possible to reduce extreme and moderate poverty rate in developing economies in Asia to less than 1% and 7%, respectively, by 2030. However, about a quarter of the region’s population may still remain socioeconomically vulnerable.
It is also important to note that there are a number of uncertainties surrounding these projections. First, economic growth may be affected by looming threats of stagflation, food insecurity, energy price shocks, debt burden, geopolitical tensions, and other risk factors. Second, assuming that societies with higher levels of social mobility prior to the COVID-19 pandemic can more easily revert to their former poverty reduction paths, the pandemic may have longer-term consequences that are yet unknown. For instance, the full implications of learning losses caused by school closures on future lifetime earnings and social mobility prospects may not be known for some decades.
Having a wide social safety net, where people’s livelihoods and well-being are protected against socioeconomic shocks, may prevent many from falling deeper into poverty. Those who have access to adequate social protection may be able to invest more resources in skills training and personal development, thereby boosting their social mobility prospects. In fact, some studies suggest that, before the COVID-19 pandemic, more than one-third of the world’s very poor managed to escape extreme poverty because of social safety nets.
As the COVID-19 pandemic unfolded, governments ramped up social protection coverage to help poor and vulnerable groups cope with disruptions that threatened their livelihoods and well-being. These measures came in the form of new or modified cash transfers, new unemployment programs, unemployment insurance, food subsidies, and sickness benefits.
It is important to sustain targeted social protection coverage as Asia and the Pacific moves towards post-pandemic recovery as there are a number of risks that threaten the region’s social mobility prospects. Those most vulnerable to such risks require ongoing access to appropriate assistance.
The unprecedented socioeconomic impacts of the COVID-19 pandemic require a long-term perspective as Asia and the Pacific navigates its way forward. Pandemic responses must pivot away from short-term solutions to transitory problems.
As we approach the halfway point of the 15-year period for achieving the 2030 Sustainable Development Agenda, policies should embrace resilience, innovation, and inclusiveness to improve the lives of society’s most vulnerable and provide more balanced opportunities.
Asia’s poor have weathered the pandemic better than the poor in some other regions of the world, but those with limited abilities to move up the economic ladder remained severely disadvantaged. Long-term innovative policies are needed to catch up to pre-pandemic poverty reduction goals and establish resilience toward future crises.