Covid-19 could leave 24m in poverty, warns World Bank

The economic impact of the Covid-19 pandemic could leave 24 million people trapped in poverty in East Asia and the Pacific (EAP), the World Bank warned on Tuesday.

In a report, the bank said China's GDP growth could slow to 2.3% this year in a baseline scenario from 6.1% last year and slump to 0.1% if the pandemic got worse.

Growth in the developing EAP region was projected to slow to 2.1% in the baseline and -0.5% in a worst-case scenario from an estimated 5.8% in 2019, the bank added.

China, where the virus was first detected, had seen a "precipitous decline" in economic activity, the report said, with the February purchasing managers' index falling below the 50-point mark that separates monthly growth from contraction.

"The fall was sharper and wider than during the great recession, to 36 in manufacturing and 30 in non-manufacturing. Industrial production also registered negative growth for the first time in more than 30 years," the bank said.

"It remains to be seen whether the government can switch on economic activity as abruptly as it was switched off. Many large industrial enterprises are reported to have resumed production, even though many small and medium enterprises are still struggling. Indirect estimates, such as pollution indicators, show that activity is increasing only gradually in China."

The economic shock would have a “a serious impact on poverty” with 24 million fewer people escaping life below the breadline - rising to 35 million if the virus was not eradicated.

“Countries in East Asia and the Pacific that were already coping with international trade tensions and the repercussions of the spread of Covid-19 in China are now faced with a global shock,” said Victoria Kwakwa, the bank's EAP vice-president.

“The good news is that the region has strengths it can tap, but countries will have to act fast and at a scale not previously imagined.”

The report called for international cooperation and “new cross-border public-private partnerships to ramp up the production and supply of key medical supplies and services in the face of the pandemic, and to ensure financial stability in the aftermath”.

It added that trade policy should stay open so medical and other supplies were available to all countries, as well as to facilitate a rapid recovery for the region.