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BRIEF April 16, 2020

Poverty and Distributional Impacts of COVID-19: Potential Channels of Impact and Mitigating Policies

In addition to its immediate impact on health outcomes and, tragically, on lives, it is now clear that the coronavirus (COVID-19) outbreak is likely to have long-lasting economic and social impacts of global proportions stemming from the direct and indirect effects of illness, the preventive behaviors of people and the transmission control policies of governments.

Specifically, GDP projections have already been revised downward for most regions and countries, driven by shocks to both domestic demand and supply and sharp declines in the circulation of goods and services, as well as people and lately capital. Revisions are likely to continue as the ultimate size and persistence of the economic impact remains unknown.

During the first few months of the outbreak, governments around the world have been correctly focused on managing the spread of the disease, relying in many cases on stringent transmission control measures without placing a high weight on the current and future economic costs of these measures. As it becomes clear that the economic and social costs of the outbreak will be significant, governments are increasingly turning their attention to a broader set of policy interventions that can help mitigate such costs. 

This note [PDF] explores the extent to which economic and social impacts may vary across income groups and, possibly, across space, and discusses policy measures that governments may consider for mitigating negative impacts on the poor and most vulnerable in the short and medium-terms. For this purpose, the note proposes a simple framework describing the main ways that aggregate shocks affect household and individual incomes, explores what channels may be most important for the poor and vulnerable, and identifies priority areas of policy focus. The note also incorporates examples from countries – of both impacts and policy options – based on responses received from a quick stocktaking exercise with staff from the World Bank’s Poverty & Equity Global Practice working in regional units.

Download the Poverty and Distributional Impacts of COVID-19: Potential Channels of Impact and Mitigating Policies Note (PDF)