What is the New Meaning of Poverty?

Current global circumstances are changing the meaning of poverty. Expert analysts and government officials are concerned about the uncertainty affecting the economic future, worrying about its implications for those living in poverty and those that will be added to those ranks.

“Reversing the damage caused by the pandemic and the war in Ukraine will require action to prevent fragmentation in business networks and invest in education and digital technologies. Also, promote labor force participation through active labor market policies,” said the World Bank Global Economic Prospects.

The global economy is forecasted to experience its sharpest slowdown after an initial recovery. Global growth is expected to slow down from 5.7 percent in 2021 to 2.9 percent in 2022 as the war in Ukraine hurts activity and trade in the short term and policy support is withdrawn amid high inflation. According to the National Council for the Evaluation of Social Development Policy (Coneval) cited by BBVA Research, it is known that in 2020 alone, 52.8 percent of the population in Mexico did not have enough income to purchase goods and services necessary to meet their basic needs. Meanwhile, 17.2 percent did not have enough income to buy essential food for adequate nutrition. Finally, 67.7 percent had at least one social deprivation. These were numbers were measured before the pandemic, which worsened these problems in several ways including:

• Current poverty is becoming the cause of future poverty due to a lack of food and nutrition, education and employment.
• The informal labor sector could be expanded, affecting retirement savings for this group.
• Possibility of income shocks due to health expenses.

ECLAC forecasts that extreme poverty and poverty will rise above the levels estimated for 2021. The incidence of regional poverty could reach 33 percent in 2022(0.9 percentage points more than the projected value for 2021), while extreme poverty could reach 14.5 percent (0.7 percentage points more than in 2021). This result reflects the trend toward a higher increase in food prices compared to other goods. The 1.1 percentage point increase in extreme poverty would mean that 7.8 million people would be added to the 86.4 million whose food security is already at risk. Food safety has been one of the most worrying issues globally, given that, as previously mentioned in MBN, demand for food is only increasing over time, putting pressure on producers to avoid global problems such as health emergencies, world hunger and lack of food security.  

In the face of this critical situation, ECLAC calls for “progress in regional energy integration, greater financing of social objectives with the economic income of raw materials, mechanisms for stabilizing fuel prices that prevent increases in international prices from being passed on to the population and to the productive sectors oriented to the domestic market, and targeted and temporary subsidies to the most vulnerable population groups and to the most relevant economic sectors in terms of transmitting the effects of price increases to the rest of the economy,” according to the study Repercussions in Latin America and the Caribbean of the war in Ukraine: How to Face This New Crisis?