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Low and middle-income economies have been the casualties of the global shocks and crises that have rattled the world in recent years. A recent study delving into poverty trends in these nations reveals a troubling panorama. The COVID-19 pandemic not only halted the steady decline in global poverty but also triggered the most substantial annual increase in poverty rates since poverty monitoring commenced, as disclosed in the 2022 Poverty and Shared Prosperity Report.
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How have poverty rates in low and middle-income countries changed in 2023?
Drawing data from the recently updated Macro Poverty Outlook (MPO) database, an analysis of projected poverty changes conducted across 104 low and middle-income countries following the pandemic shock. These poverty projections combine the latest household survey data with additional information like growth forecasts, utilizing an array of tools, including microsimulation models. While these projections are not official estimates, they offer the most current insights into poverty trends.
In 2020, three out of four low and middle-income countries witnessed an upswing in their poverty rates, measured against the international poverty line of $2.15 per day, compared to 2019. But what has been the trajectory since then? Following the initial increase in 2020, the majority of countries experienced a decline in their poverty rates each subsequent year (some based on actual data through 2021, while others rely on projections). Remarkably, despite the ongoing crises, it is estimated that three out of four countries will see a reduction in poverty rates in 2023.
The average poverty rate across low and middle-income countries (unweighted by population) is projected to have remained relatively stable, standing at 18.6% in 2019 and slightly decreasing to 18.3% in 2023. More than half of the countries exhibited lower poverty rates in 2023 compared to 2019, indicating that, on average, these nations have made strides toward recovering pre-pandemic levels. However, individual country experiences have been far from uniform over the past five years. Most regions encompass countries where poverty has risen as well as those where poverty has declined. Sub-Saharan Africa stands out with the most disparate outcomes. For instance, Mali is projected to have witnessed a 7.2 percentage point increase in poverty between 2019 and 2023.
Conversely, a few regions have demonstrated surprising resilience to the COVID-19 pandemic when it comes to poverty levels. All countries analyzed in the Europe & Central Asia region exhibited lower projected poverty rates in 2023 compared to pre-pandemic levels (data for Ukraine at this poverty line is unavailable). South Asia shows a similar trajectory, with the exception of Sri Lanka. Latin America & the Caribbean also showcases strong performers, including Brazil and Guatemala, which are projected to see decreases of 3.5 and 2.5 percentage points, respectively.
The magnitude of changes at the international poverty line depends partly on the initial poverty levels. Given that most countries outside of Sub-Saharan Africa have low poverty rates at this threshold, even significant crises and recoveries are unlikely to cause substantial shifts in poverty rates when measured in percentage points.
However, these trends hold true, for the most part, at both the lower middle-income poverty line ($3.65 per day) and the upper-middle-income poverty line ($6.85 per day), with some exceptions. For instance, Armenia and Tajikistan are projected to experience slight poverty decreases at the $2.15 poverty line but double-digit decreases at the $6.85 poverty line. Therefore, economic recovery in relatively wealthier countries might be understated when solely considering the $2.15 international poverty line.