The financial impact of coronavirus will stop almost 24 million people from escaping poverty in East Asia and the Pacific, according to the World Bank.
It says “significant economic pain seems unavoidable in all countries”.
The World Bank warned of “substantially higher risk” among households that depend on industries particularly vulnerable to the impact of the virus.
These include tourism in Thailand and the Pacific Islands, along with manufacturing in Vietnam and Cambodia.
The bank urged the region to invest in expanding healthcare and medical equipment factories, and to offer subsidies for sick pay that would help with containment and aid households.
In its baseline scenario, almost 24 million fewer people will escape poverty across the region in 2020 due to the economic impact of the pandemic.
Under its worst-case scenario, the bank predicts that almost 35 million people would be expected to remain in poverty, including 25 million in China. It defines the poverty line as living on $5.50 a day or less.
The World Bank predicts growth this year in the developing East Asia and Pacific region will slow to 2.1% in its baseline scenario. This compares with an estimated expansion of 5.8% for 2019.
The bank said precise growth forecasts were difficult, given the rapidly changing situation.
“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,” said Victoria Kwakwa, vice president for East Asia and the Pacific at the World Bank.
The latest economic data from China on Tuesday gave a glimmer of hope, as they suggested factory activity rebounded in March following a big contraction in February.
China’s official Purchasing Managers’ Index (PMI) rose to a stronger-than-expected 52 this month after hitting a record low of 35.7 in February. A figure above 50 indicates expansion.
However, Julian Evans-Pritchard, senior China economist at Capital Economics, said the figure did not mean that output was now back to its pre-virus trend.
“Instead, it simply suggests that economic activity improved modestly relative to February’s dismal showing, but remains well below pre-virus levels,” he said.
The World Bank’s outlook is grim – to say the least.
Unavoidable significant pain in all countries – that’s the World Bank’s forecast for growth in the East Asia region this year.
The poor will get poorer – and there will be more of them – and even rich countries will struggle to keep businesses and households afloat.
In China, where the outbreak began, the bank says the virus’s impact on the economy will see growth slow to 2.3% this year from 6.1% last year. But that’s if the pandemic doesn’t get worse. If it does, growth could be just 0.1% this year. The bank’s forecasts for other countries in east Asia are similarly grim.
Worse still, according to the bank, will be the serious impact on poverty, both directly through illness and indirectly through lost incomes. Those in the informal sector will be hardest hit, and will need the most help.
Asia – and in particular China – has been the world’s economic engine for the past decade. The coronavirus pandemic has stopped that growth in its tracks. Recovery will be long and difficult.