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Part 1: Progress on Poverty and Shared Prosperity

Progress in reducing global poverty has essentially halted: by 2030, nearly 7 percent of the world's population—nearly 600 million people—will still struggle in extreme poverty. Within-country inequality increased in as many countries as it declined, but after decades of convergence, global inequality increased. The poorest have also suffered disproportionate losses in health and education with devastating consequences.

2020 saw the biggest setback to global poverty in decades, and the recovery has been highly uneven. This chapter presents the latest estimates on the magnitude of the setbacks. In presenting the World Bank’s first official global poverty estimates for 2019, it also describes how the world entered the COVID-19 crisis already in a weak position from a global poverty reduction perspective.

During the pandemic, large and unequal job and income losses were reported, contributing to concerns about rising inequality within countries. This chapter draws on official data and projections to show that within countries, changes in inequality were mixed in 2020, although global inequality increased driven by differences between countries.

COVID-19 has affected many dimensions of human well-being. But how does one measure the combined extent of these impacts? This chapter explores multidimensional measurements of poverty with the latest available data, and shows that recent setbacks, if left unaddressed by policy action, will have lasting consequences for people’s lifetime income prospects.

Correcting course is both urgent and difficult, but it is now time for policy makers to put everything they can into the effort. Part 2 of this report focuses on fiscal policy—the decisions that governments make on revenue raising and spending—and how it affects poverty and inequality. Many of the policy choices made during crisis and noncrisis times affect growth and welfare outcomes, and these choices span a range of monetary, financial, regulatory, and trade dimensions.

The fiscal response to the COVID-19 pandemic has been unprecedented in scale. This chapter is a first look at the lessons learned from this global experience to date.

Taxes, transfers, and subsidies are core components of fiscal policy, and their potential effect on household welfare is considerable. This chapter considers their immediate impact on the amount of money households have.

The impact of fiscal policies on poverty and inequality depends not just on who benefits from them but also how they support income growth in the short and long run. This chapter considers the key elements of valuing fiscal policies and how information on the full value of policies can inform policy decisions.

This chapter brings together the two parts of the report and recommends key fiscal policy priorities. It outlines options for countries to spend on higher-value policies that produce growth, protect households against crises, and raise revenue.