Is the poverty rate rising?

The rising of poverty rate and population vulnerability is one of the main challenges the country has always been dealing with, and as one of the events in which the pandemic has affected the most, even though having recovered a bit from the terrible percentage drop of the early years; population is still at constant risk of falling into poverty. Taking into consideration the difficult situation Peru went through when declaring itself in a State of Emergency in 2020, demand a mandatory quarantine –which paralyzed the economy– and face a high record of deaths from contagion of the disease; the purpose of this article is to explain the incidence of poverty situation during the pandemic, what is expected to happen and how unemployment is the main reason for its increase.

Before the arrival of the Coronavirus, the INEI shows the following statistics from 2019: the 45.8% of the population were in a Non-Vulnerable situation (green), the 34% were in a Vulnerable situation (yellow), the 17.8% were Non-Extreme Poor (orange), and the 2.9% were Extreme Poor (red). With this said, for the year of the pandemic there was an increase of 1.5 percentage points in the Vulnerable range, a dreadful sum of 7.2 percentage points in the Non-Extreme Poor and 2.2% was added to Extreme Poor (RPP, 2021). The main reason for this devastating fact is in the line of employment status; the commercial paralysis and the reduction of jobs and incomes, are mainly the reason why many people could not even supply the basic monthly consumption basket –being even more difficult for the ones in rural area– and with sacrifice could reach the end of the year.

On the other hand, in 2021, it can be observed in this same graph a slight recovery from the fall of the previous year; due to the increase in the total income of the population. However, in the same way, poverty remains above the standards of the past decade (2010) –with the exception of rural monetary poverty–. Thus, in the framework of the Non-Vulnerable population 5.1% recovered, remaining at 39.5%; in the framework of Non-Extreme Poor, there was a reduction of 3.2 percentage points (from 25% to 21.8%); and, finally, the Extremely Poor framework was reduced to 4.1%. From this it can be concluded that although there was a slight improvement, poverty in the capital is still lower than it was before the pandemic and even worse than it was 10 years ago. And, it should be emphasized that the measurement of poverty in Peru is carried out through the indicator of spending on the basket of goods –as previously mentioned–.

The growth rate estimated for Peru in the following years, says that poverty could rise around 27.5%, and stay still as of 2023, with a difference of a low few hundredths. This state is supported by Macroconsult, which notes that if we assume that by 2024 the percentage grows at moderate rates such as 2.2% or even 2.5% and inflation converges in its target range; the result would be around 25% by the end of 2026. However, in the pessimistic point of view in which the economy (by 2024) has a growth of zero percentage, this would end up increasing up to 29% in 2026, almost reaching the level of the pandemic. So based on this analysis, it is possible to affirm that in the period of 2021 to 2026, all efforts to try to reduce the poverty rate will be in vain due to the inability of our economy to generate a favorable environment for its reduction.

In conclusion Peru has always faced the problem of poverty, trying to find ways to decrease it; but with the arrival of the Covid-19 pandemic, its condition just turned worse. It is important to mention that even though the country was able to recover for a minimal amount of percentage, it is still not in the right state to become what it was before 2020 –or even to get better– and the reduction of jobs and incomes just keep turning its situation into a major problem. So poverty in the capital is still higher than what it was 10 years ago, and it is expected to not benefit society as the years go by. Government has not been a great help either, but it is up to the time to see if there is a way this issue can get better; in the best situation to come back the way it was and in the worst one, just to not rise.

BIBLIOGRAPHIC REFERENCES

Alarco, G. (2022, 16 demayo). Evolución de la pobreza monetaria 2010-2021: Diagnóstico y comentarios. Diario Gestión. Recuperado de: https://gestion.pe/blog/herejias-economicas/2022/05/evolucion-de-la-pobreza-monetaria-2010-2021-diagnostico-y-comentarios.html/?ref=gesr 

Instituto Peruano de Economía (IPE). (2022, 15 de mayo). SUR: POBREZA SE REDUJO DE 31% EN 2020 A 26% EN 2021. Recuperado de: https://www.ipe.org.pe/portal/sur-pobreza-se-redujo-de-31-en-2020-a-26-en-2021/#_ftn1 

Redacción RPP. (2022, 9 de mayo). Más de 11 millones de peruanos están en riesgo de caer en la pobreza según el INEI. RPP Noticias. Recuperado de: https://rpp.pe/economia/economia/mas-de-11-millones-de-peruanos-estan-en-riesgo-de-caer-en-la-pobreza-segun-el-inei-noticia-1404060?ref=rpp 

Villar, P. (2022, 16 de mayo). La pobreza en Perú aumentaría este 2022, por alta inflación y menor crecimiento, Bloomberg Línea. Recuperado de: https://www.bloomberglinea.com/2022/05/16/la-pobreza-en-peru-aumentaria-este-2022-por-alta-inflacion-y-menor-crecimiento/