Using World Bank estimates of where the global middle class stood before the pandemic struck more than a year ago and estimates for growth in gross domestic product before the virus hit worldwide, Pew says the middle class likely lost 54 million people while the ranks of the poor grew by 131 million.
The drop was concentrated in South Asia, primarily India along with sub-Saharan Africa, reversing years of progress. Pew estimates that without COVID-19, some 1.38 billion people were expected to be considered middle class in 2020. The pandemic has lowered that estimate to 1.32 billion. In percentage terms, the rate drops from 17.8% of the world’s 7.67 billion to 17.1%. The decline would have been worse had not China, which accounts for more than one-third of the global middle class, avoided an economic contraction similar to those seen in other countries.
Prior to the pandemic, World Bank economic forecasts had pegged global growth at 2.5% for 2020. In January, the bank said it estimates global gross domestic product GDP fell by 4.3%–an overall reversal of 6.8%.
Current World Bank forecasts for GDP growth in 2021 are 4%. “Put the two years together and you are looking at two years of stagnation,” said Rakesh Kochhar, senior researcher and lead author of the Pew report.
On an individual basis, some countries saw sharp contractions in GDP in 2020. Notably, India is expected to have seen a drop of about 10%, whereas China’s GDP grew 2.3%. Given their outsize populations, their experiences had a meaningful effect on the overall dip in the global middle class.
“South Asia, specifically India, accounted for most of the increase in poverty, reversing years of progress,” Pew noted.
Global poverty had settled at an average rate of 49 million annually from 2011 to 2019, with the total number living in poverty falling from 1.10 billion to 691 million. The pandemic is adding 131 million to that number and the poverty rate is now estimated to have increased from 9% in 2019 to 10.4% last year.
Pew’s assessment comes as many forecasters, both private and public, have been raising their expectations for GDP growth in 2021. The Organization for Economic Cooperation and Development last week raised its forecast to 5.6% this year, an increase of 1.4 percentage points since the agency’s December outlook was issued, and 4% in 2022. That would put growth above pre-pandemic levels by the summer.
The International Monetary Fund, which includes 190 countries compared with the OECD’s 37, also has raised its forecast to 5.5% in 2021 and 4.2% in 2022.
If those forecasts prove accurate, it may mitigate somewhat the effect of the pandemic on the middle class and poverty. But that may be little comfort to people in many countries where middle income is defined as living on between $10 and $20 a day and where the poor live on $2 a day or less.
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