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Coronavirus: World Bank warns of COVID-19 economic pain and poverty for Asia

·Finance and news reporter
·2-min read
BEIJING, CHINA - MARCH 30, 2020: People wear protective face masks in a shopping and entertainment area in the Chinese capital. Since the start of the coronavirus outbreak in China, 93% of COVID-19 infected patients have recovered. The authorities imposed a two-week quarantine and took a number of measures to prevent a second wave of pneumonia. Artyom Ivanov/TASS (Photo by Artyom Ivanov\TASS via Getty Images)
People wear protective face masks in a shopping and entertainment area in Beijing. (Artyom Ivanov/TASS via Getty Images)

The spiralling impacts of the coronavirus pandemic are likely to drastically dent economic growth in East Asian developing economies as well as in China, the World Bank warned on Tuesday.

New data suggests that the crisis will also have severe impacts on the level of poverty in the region, with 24 million fewer people now likely to escape poverty this year as a result of the pandemic.

The number of people living below the poverty line could actually climb if economic conditions worsen, the bank advised.

“If the economic situation were to deteriorate further, and the lower-case scenario prevails, then poverty is estimated to increase by about 11 million people,” the World Bank said on Tuesday.

Read more: UK economic growth flatlined even before coronavirus hit country

Prior projections estimated that almost 35 million people would have escaped poverty in the region this year, including over 25 million in China alone.

Growth in the region’s developing economies will now slow to 2.1% this year, and could contract by as much as 0.5% in the bank’s “lower case” scenario. The economies grew by 5.8% in 2019.

In China, the World Bank predicts that growth will slow to 2.3% in its baseline scenario. Economic growth could come in at 0.1% in its lower case scenario, compared to growth of 6.1% in 2019.

“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 vice-president for East Asia and the Pacific at the World Bank.

“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,” she said.

Read more: Coronavirus 'will wipe 15% off UK GDP' in the next quarter

The World Bank said that urgent investments in national healthcare capacity and longer-term preparedness were needed in the region.

Targeted fiscal stimulus measures — such as subsidies for sick pay and healthcare — would ensure that the temporary effects do not translate into longer-term losses, it said.

“In addition to bold national actions, deeper international co-operation is the most effective vaccine against this virulent threat. Countries in East Asia and the Pacific and elsewhere must fight this disease together, keep trade open and coordinate macroeconomic policy,” said Aaditya Mattoo, the World Bank’s chief economist for the region.

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