How COVID-19 Will Increase Inequality in Emerging Markets and Developing Economies

2020-10-30T15:49:14-04:00October 29, 2020|

By Gabriela Cugat and Futoshi Narita

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Emerging markets and developing economies grew consistently in the two decades before the COVID-19 pandemic hit, allowing for much-needed gains in poverty reduction and life expectancy. The crisis now puts much of that progress at risk while further widening the gap between rich and poor.

Despite the pre-pandemic gains in poverty reduction and lifespans, many of these countries have struggled to reduce income inequality. At the same time, they saw persistently high shares of inactive youth (i.e., those not in employment, education, or training), wide inequality in education, and large gaps remaining in economic opportunities for women. COVID-19 is expected to make inequality even worse than past crises since measures to contain the pandemic have had disproportionate effects on vulnerable workers and women.

As part of our latest World Economic Outlook we explore two facts about the current pandemic to estimate its effect on inequality: a person’s ability to work from home and the drop in GDP expected for most countries in the world.

The impact of where you work

First, the ability to work from home has been key during the pandemic. A […]

A Long, Uneven and Uncertain Ascent

2020-11-16T10:48:03-05:00October 13, 2020|

By Gita Gopinath

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The COVID-19 pandemic continues to spread with over 1 million lives tragically lost so far. Living with the novel coronavirus has been a challenge like no other, but the world is adapting. As a result of eased lockdowns and the rapid deployment of policy support at an unprecedented scale by central banks and governments around the world, the global economy is coming back from the depths of its collapse in the first half of this year. Employment has partially rebounded after having plummeted during the peak of the crisis.

This crisis is however far from over. Employment remains well below pre-pandemic levels and the labor market has become more polarized with low-income workers, youth, and women being harder hit. The poor are getting poorer with close to 90 million people expected to fall into extreme deprivation this year. The ascent out of this calamity is likely to be long, uneven, and highly uncertain. It is essential that fiscal and monetary policy support are not prematurely withdrawn, as best possible.

This is the worst crisis since the Great Depression, and it will take significant innovation on the policy front, at both […]

How Pandemics Leave the Poor Even Farther Behind

2020-06-01T12:00:09-04:00May 11, 2020|

By Davide Furceri, Prakash Loungani, Jonathan D. Ostry

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The COVID-19 crisis is now widely seen as the greatest economic calamity since the Great Depression. In January, the IMF expected global income to grow 3 percent; it is now forecast to fall 3 percent, much worse than during the Great Recession of 2008-09. Behind this dire statistic is an even grimmer possibility: if past pandemics are any guide, the toll on poorer and vulnerable segments of society will be several times worse. Indeed, a recent poll of top economists found that the vast majority felt the COVID-19 pandemic will worsen inequality, in part through its disproportionate impact on low-skilled workers.

Our evidence supports concerns about the adverse distributional impacts of pandemics. We find that major epidemics in this century have raised income inequality and hurt employment prospects of those with only a basic education while scarcely affecting employment of people with advanced degrees.

We focus on five major events—SARS (2003), H1N1 (2009), MERS (2012), Ebola (2014) and Zika (2016)—and trace out their distributional effects in the five […]

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