Impact Of Global Crisis On Poverty?

The Global Monitoring Report 2010 attempts to assess the impact of the global economic crisis on poverty

. Are the numbers useful?

According to the World Banks analysis, the global economic crisis has had an negative impact on poverty, but could have been much worse. The report argues that timely and effective policies, including IFI assistance, helped save the day.

What was the impact of the crisis?

The report correctly says that its too early to have a sharp snapshot of the various MDG indicators. So what Bank staff have done is estimate the impact using economic modelling techniques.

Bank staff estimate the impact of the crisis on poverty by simulating poverty reduction for post-crisis and pre-crisis scenarios. For example, the model estimates that without the crisis, global poverty would have fallen to 918m people in 2015; with the crisis the number is 865m; so the impact is 53m.

The same calculation can be broken down regionally and the results are shown above. It is striking that the impact on poverty is concentrated in Africa and South Asia. The impact in India also stands out, not least because India is widely considered to have weathered the global crisis well. One explanation is that India has a large number of poor people (456m in 2005), so even small changes in GDP can have big impact of the number of extra people in poverty.

Bank staff have done a great job analysing the impact of the global economic crisis on poverty and the Global Monitoring Report 2010 is well worth a read. Critics may complain about the Banks methodology, but we havent yet seen any better estimates. And with a big UN Summit in September to discuss the MDGs, the Banks analysis does attempt to fill an important knowledge gap.

So our assessment is that while calculations are crude, they are the best we have now and a useful reference point for policy discussion.

by: Matt

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