Friday, January 21, 2022
Google search engine
HomeNewsHow Covid-19 Has Widened the Gap Between Rich and Poor Countries

How Covid-19 Has Widened the Gap Between Rich and Poor Countries


The Covid-19 pandemic is widening the gap between rich and poor countries, a trend that threatens to reverse years of economic progress and set back efforts to alleviate global poverty.

The pandemic pushed the global economy into recession in 2020, but richer nations have bounced back faster than poorer ones, thanks to widespread access to vaccines and lavish programs to support businesses and workers through lockdown.

The U.S. economy regained its pre-pandemic size in the second quarter of 2021, and most other big economies are expected to follow suit in 2022, if they haven’t already.

The economies of many developing nations, however, could take years to regain their 2019 size. The International Monetary Fund has labeled the widening rift “the great divergence.”

GDP, annual change in economies by classification, 2000–2026

Widening between economies as emerging growth rates increase, catching up with advanced economies

Narrowing between economies as emerging growth rates slow against advanced economies

Sharp narrowing as the pandemic hits followed by slow projected growth

Widening between economies as emerging growth rates increase, catching up with advanced economies

Narrowing between economies as emerging growth rates slow against advanced economies

Sharp narrowing as the pandemic hits followed by slow projected growth

Widening between economies as emerging growth rates increase, catching up with advanced economies

Narrowing between economies as emerging growth rates slow against advanced economies

Sharp narrowing as the pandemic hits followed by slow projected growth

Widening between economies as emerging growth rates increase, catching up with advanced economies

Narrowing between economies as emerging growth rates slow against advanced economies

Sharp narrowing as the pandemic hits followed by slow projected growth

Widening between economies as emerging growth rates increase catching up with advanced economies

Narrowing between economies as emerging growth rates slow against advanced economies

Sharp narrowing as the pandemic hits followed by slow projected growth

The Omicron variant of Covid-19, first spotted in November in South Africa, represents a new challenge. The variant has spread rapidly world-wide, displacing older strains such as Delta due to its higher transmissibility and ability to partially evade the immunity conferred by vaccination or prior infection.

A growing body of evidence suggests Omicron causes less severe disease than its predecessors. Yet the variant still has the potential to cause waves of illness that richer countries, with access to vaccines and sophisticated healthcare systems, are better equipped to handle than poorer ones.

In the two decades before the pandemic, developing economies had been closing the gap with their advanced peers in terms of wealth, health and education. Developing economies’ growth rates in the first decade of the 21st century outpaced those of richer countries, though the gap had narrowed just before the pandemic.

In 2010, emerging economies were growing much faster than advanced economies, boosting hopes of reducing global poverty.

By 2019, growth in emerging economies had slowed to rates closer to those of advanced economies, tempering the progress of the previous decade.

In 2020, economic growth crumbled worldwide as pandemic lockdowns put whole economies in the deep freeze until the virus was brought under control. China was one of a small number of countries that maintained growth despite the pandemic.

In 2021, growth recovered in richer and poorer countries as governments reopened their economies. But the double-digit growth many developing countries experienced in previous decades has been elusive.

One key divide between rich and poor nations during the pandemic has been the disparity in vaccination rates, which has significantly favored richer countries.

Death rates in 2020 from Covid-19 were high in advanced economies as they were hit early in the pandemic.

Last year, death rates rose in emerging economies as new variants fueled big outbreaks, while many advanced economies’ death rates fell thanks to widening vaccination coverage.

Note: Data for GDP per capita and population are for 2020 throughout. Groupings are based on World Bank classifications. Excludes several countries that don’t have available data for some indicators. For display purposes, three outliers in GDP growth were excluded: Guyana (43.5% in 2020), Libya (–59.7% in 2020 and 123.2% in 2021) and Venezuela (–35% in 2019 and –30% in 2020). Economic data updated as of October 2021. Covid-19 data as of Dec. 31.

Sources: International Monetary Fund (GDP, GDP per capita); World Bank (population); Our World in Data (Covid-19 vaccinations, deaths)

One way the pandemic has set back developing economies is by its effect on remittances from workers overseas, an important source of income for households and the wider economy. Remittances to developing countries fell by more than a quarter on average in 2020, as economies locked down around the world and workers lost their jobs.

Annual change in remittances

for low-income economies

ANNUAL CHANGE IN REMITTANCES

Democratic

Republic of

Congo

Note: Personal remittances received by country;

excludes several countries that don’t have available data.

Sources: World Bank (remittances); International Monetary Fund (GDP per capita)

Annual change in remittances

for low-income economies

ANNUAL CHANGE IN REMITTANCES

Democratic

Republic of

Congo

Note: Personal remittances received by country;

excludes several countries that don’t have available data.

Sources: World Bank (remittances); International Monetary Fund (GDP per capita)

Annual change in remittances

for low-income economies

ANNUAL CHANGE IN REMITTANCES

Democratic

Republic of

Congo

Note: Personal remittances received by country;

excludes several countries that don’t have available data.

Sources: World Bank (remittances); International Monetary Fund (GDP per capita)

Annual change in remittances

for low-income economies

ANNUAL CHANGE IN REMITTANCES

Democratic

Republic of

Congo

Note: Personal remittances received by country; excludes several countries that don’t have available data.

Sources: World Bank (remittances);

International Monetary Fund (GDP per capita)

Annual change in remittances for low-income economies

ANNUAL CHANGE IN REMITTANCES

Democratic

Republic of

Congo

The pandemic also pushed people out of work. In advanced economies, government support for workers and speedy recoveries have led to a recovery in employment. Demand for labor in some economic sectors is so high that employers can’t find staff. In developing economies, though, many governments lacked the fiscal firepower to offer equally generous support, and slower recoveries mean employment will likely take longer to recover.

Percentage of population 15 and older who are employed, by economic classification

Percentage of population employed

Percentage of population 15 and older who are employed, by economic classification

Percentage of population employed

Percentage of population 15 and older who are employed, by economic classification

Percentage of population employed

Percentage of population 15 and older who are employed, by economic classification

Percentage of population employed

Percentage of population 15 and older who are employed, by economic classification

Percentage of population employed

For developing countries, the economic hits add up to a significant projected increase in the number of people living in extreme poverty, defined by the World Bank as less than $1.90 a day, compared with prepandemic expectations.

Projected number of people in extreme poverty, by country income group, 2021

Upper-middle income countries

Lower-middle income countries

Projected number of people in extreme poverty, by country income group, 2021

Upper-middle income countries

Lower-middle income countries

Projected number of people in extreme poverty, by country income group, 2021

Upper-middle income countries

Lower-middle income countries

Projected number of people in extreme poverty, by country income group, 2021

Upper-middle income countries

Lower-middle income countries

Projected number of people in extreme poverty, by country income group, 2021

Upper-middle income countries

Lower-middle income countries

Economists say some of the pandemic’s potential longer-term effects include a squeeze on poorer countries’ room for growth. In education, for instance, it isn’t known if girls will return to the classroom as quickly as boys when Covid-19 recedes, undermining progress on narrowing attainment gaps between the sexes in poorer countries.

Christoph Lakner, a senior economist at the World Bank, said that before the pandemic, progress on alleviating poverty world-wide was already slowing. Rapid growth in incomes in places such as India and China in previous decades drove a steep reduction in poverty that had started to peter out as the world’s poorest became increasingly concentrated in places beset by conflict. The virus has intensified that slowdown, he said.

“Covid is a big setback,” he said.

Write to Jason Douglas at jason.douglas@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



Source link

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments