Poverty in East Asia and the Pacific could increase this year for the first time since 1967, the World Bank stated in a new report.
As the underdeveloped economies have been hit by weak demand and shrinking markets due to the Wuhan virus, the pandemic will keep people in poverty and creates a class of new poor, the World Bank analysts stated.
In the report, the World Bank examined how the region's developing countries were hit by the "triple shock" of the pandemic, containment measures, and the global recession, and called for reforms to alleviate their impact on the poor and on regional growth.
"While the devastation caused by the pandemic is common knowledge, less recognised is that what happens to the economy today and growth tomorrow will depend less on the virus, than on how governments act," World Bank chief economist for East Asia and the Pacific Aaditya Mattoo told reporters in a briefing on Thursday.
"Without meaningful reform, growth rates could be as much as 1 per cent lower every year for next 10 years, with some of the biggest impacts felt by the poor," he added. The report estimated that there could be up to 38 million more people living in poverty in the region this year, defined as those living on less than US$5.50 per day in 2011 purchasing power parity rates.
Weak demand and lose of markets
The Bank analysts forecasts the dramatic slowdown of Cambodia, Indonesia, Laos, Malaysia, Mongolia, Myanmar, Papua New Guinea, the Philippines, Thailand, Timor-Leste, Vietnam economies due to the weakening demand and lose of the markets in effect of competition with the powerful economies supported by tech and industrial sectors.
"Sickness, unemployment and school closures could lead to the erosion of human capital and earning losses that last a lifetime," the World Bank said in its report.
It estimated that as a result of school closures due to Covid-19, the average student in the region could face a reduction of 4 per cent in expected earnings every year of his working life.
While many countries have been successful in containing the coronavirus, with many governments having stepped in to give fiscal support to households and companies, they will struggle to recover and grow, said Dr Mattoo.
Support for firms is also needed to prevent bankruptcies and unemployment, but these firms should have the potential to thrive in the future, the World Bank said.