Inequality Is About To Get A Lot Worse Because Of Covid

The global coronavirus pandemic has become an accelerant for global inequality that was already at extreme and destabilizing levels before the crisis.

The trend could be especially pronounced in emerging economies, according to new research from the International Monetary Fund.

“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,” IMF economists Gabriela Cuat and Futoshi Narita write in a new blog.

“The crisis now puts much of that progress at risk while further widening the gap between rich and poor.”

The ability to work from home is key to continued productivity during the pandemic—and poorer workers are much less likely to have that privilege. The Fund uses its own growth projections to estimate the loss of income across brackets relative to each one’s ability to work from home.

“Measures to contain the pandemic have had disproportionate effects on vulnerable workers and women,” the authors write. “The estimated effect from Covid-19 on the income distribution is much larger than that of past pandemics.”

Recommended For You

This means “the gains for emerging market economies and low-income developing countries achieved since the global financial crisis could be reversed.”

Things could get even worse for countries that face financial crises, a rising possibility as the pandemic remains largely out of control in many parts of the world.

Patrick Honohan, former governor of the Bank of Ireland, warns in a new post that “with the knock-on financial impact of the Covid pandemic, it is likely that several countries could soon face macro-financial crises, with investors rushing for the exit (as in Lebanon, where a crisis is already well underway).”

Comments are closed.