Archive for category: Economy

Information and stories about economy.

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Central Bank Digital Currencies in Emerging Economies

Central Bank Digital Currencies
Financial exclusion remains a challenge in many low-income countries. This is especially true in rural areas, which do not have easy access to banks. Even in areas with bank branches, community members may find themselves excluded because many low-income countries have a small financial sector with few financial institutions. The lack of financial accessibility results in high interest rates and expensive charges for ATM use and other transactions. Central Bank Digital Currencies (CBDCs) are a dynamic tool in providing solutions to improve financial inclusion.

What are Central Bank Digital Currencies?

Central Bank Digital Currencies is digital fiat currency (or national currency, such as the peso or naira) that the central bank regulates. Currently, only nine countries have launched CBDCs. The Bahamas was the first country to do so, in October 2020. However, 16 countries are developing them and 40 countries are researching the possibility of instituting them. The potential of central bank digital currencies in emerging economies is particularly strong.

Why Central Bank Digital Currencies in Emerging Economies?

Central banks across the world are considering launching CBDCs for various reasons. For one, the rising influence of digital currency has created the conditions in which central banks could lose control of currency regulation, as well as increasing preference for digital payments over cash. However, there are several unique reasons why central bank digital currencies in emerging economies are especially relevant because of the ways they can expand financial inclusion.

  • Cross-border payments can be faster, more affordable and more secure. Traditional cross-border payments are expensive and inefficient. According to The Economic Times, “The global average cost for sending remittances (0f $200) in Q1 of 2021 stood at 6.38%. There are often time lags for cross-border fund transfers, during which counterparties are exposed to credit and settlement risk.” CBDCs could help expedite cross-border payments and eliminate some of the associated costs. Because many households in emerging economies depend on remittances as a substantial source of income, CBDCs could make making and receiving them much easier on low-income individuals.
  • Central Bank Digital Currencies in emerging economies could serve the unbanked population. The digitization of currency has ensured the safe and easy accessibility of accounts and payment services. The rise of digital currencies has also seen a decrease in the number of unbanked people.

Looking Ahead

Financial inclusion is vital to social inclusion and combats poverty and income inequality by offering financial opportunities for low-income people and those involuntarily excluded from the financial market. The World Bank’s goal of ending extreme poverty by 2030 includes the key component of reducing income inequality. CBDC initiatives provide a dynamic tool in addressing income equality.

More countries are updating their financial framework and promoting digital financial literacy. For example, Aadhaar, India is developing a digital ID system that will encourage undocumented people to join the financial sector. This could ultimately provide secure transactions for those typically excluded from the financial market. Strengthening innovative financial frameworks such as CBDCs encourage a more equitable and inclusive global regulatory system.

– Jennifer Hendricks
Photo: Flickr

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How Economic Support Programs Aid Families

Economic Support Programs Aid Families
The International Committee of the Red Cross (IRC) “defines economic security as the ability of individuals, households or communities to cover their essential needs sustainably and with dignity.” Basic needs include “food, basic shelter, clothing and hygiene” and economic support programs aid families by providing low-income households with essential financial support to meet these needs and more.

For the Jefas Program

A municipality in Mexico City, Miguel Hidalgo, is providing financial support through the For the Jefas program to “2,000 women who are mothers and the only breadwinner in their home.” Announced in February 2022, the program’s overall aim is to “cover and complement family spending” in order for families to meet their basic needs. The funding involves three disbursements of 5,000 pesos each.

In addition to this economic assistance, the program offers women skills training courses to improve employability, and thus, increase their chances of securing skilled employment. A report from the Center on Budget and Policy Priorities found that economic security programs have the potential to lift people out of poverty, especially in the case of marginalized groups and children.

Economic Support Programs Alleviate Poverty

Government programs such as For the Jefas present a successful approach in reducing poverty and providing families with the opportunity to escape generational poverty. Economic support programs aid families by bolstering the income of low-income families, especially those headed by single women, ultimately allowing families to afford basic needs and keep children out of poverty. According to the Center of Budget and Policy Priorities, economic security programs have long-term benefits as more resources improve children’s school performance and increase their earning potential as they enter the job force.

3 Benefits of Economic Support Programs

  1. Improves mental health outcomes: Poverty-related stress has negative long-term impacts on children’s development and physical health. Economic support programs aid families by reducing or eliminating financial stressors, allowing families to not just survive but thrive.
  2. Increases nutrition while decreasing illness: Poor nutrition links to chronic metabolism-related illnesses such as diabetes and high blood pressure. Access to nutritionally rich foods has long-term benefits for children as they are less likely to develop chronic illnesses in adulthood. Economic support programs aid families by providing the financial resources necessary to purchase and access nutritional food.
  3. Boosts children’s school achievement and future economic success: Economists find that additional income leads to an increase in children’s reading and math test scores. Academic success tends to follow children into adulthood where they have a greater opportunity for higher-earning and employment rates.

Income Support Stabilizes Household Budgets

Poverty reduction policy solutions such as economic support programs are more vital than ever as COVID-19 disproportionately impacts low-income households. Programs such as For the Jefas provide the most important element of a stable household budget, sufficient income. The program also provides training and education for mothers, which ultimately allows families to achieve self-sufficiency. Single-family households receiving income support also see an increase in labor force participation from single mothers with children.

Economic support programs aid families by ensuring that low-income households have the necessary income for basic expenses and increase learning and job opportunities for children.

– Jennifer Hendricks
Photo: Flickr

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The Effects of the Economic Collapse in Lebanon

Economic Collapse in Lebanon
Poverty continues to loom over Lebanon’s most vulnerable communities, leaving them to battle with deteriorating living standards and several health hazards. Lebanese people’s quality of life sank to an unprecedented low due to many reasons. One of the most prominent reasons for the economic collapse in Lebanon is the Lebanese government’s immense amount of debts that add up to the “equivalent [of] 150% of national output.”

Lebanon’s Economic Landscape

Some financial experts describe the Lebanese government’s economic system “as a nationally regulated Ponzi scheme where new money is borrowed to pay existing creditors.” Adding to the nation’s troubles, the corrupt elite in Lebanon exploited the country’s foreign aid and income post-civil war and continue to do so to this day. The indebted government struggled to make ends meet, which led to the devaluation of the national Lebanese currency. While the economic collapse affected all citizens residing on Lebanese land, the already dire standard of life of the Lebanese lower-class became worse in several ways.

5 Ways the Economic Collapse in Lebanon Impacts Disadvantaged People

  1. Unlivable Wages: The official Lebanese currency, the Lebanese pound, “lost more than 90% of its value.” This extreme devaluation plunged the Lebanese further into poverty. The minimum wage in Lebanon’s value decreased from the equivalent of $450 monthly to what is now worth around $30 per month. As a consequence, “a family’s budget just for food is around five times the minimum wage,” says the Crisis Observatory at the American University of Beirut.
  2. Medicine Shortage: Due to the scarcity of foreign currency in the country, Lebanese pharmaceutical companies struggle with importing or manufacturing life-saving medicine. To counter this shortage, in July 2021, the Lebanese government lifted subsidies on most life-saving medicine. While this development affects the entire Lebanese population, those with limited or no income experience the greatest impact as medicine now becomes a luxury most cannot afford.
  3. Life-Threatening Power Outages: As the Lebanese economy continues to suffer, the government struggles to import fuel and maintain power generators. As a result, low-income neighborhoods across the country barely receive one hour of electricity per day. This circumstance proved to be extremely destructive as companies, bakeries, schools, grocery stores and even hospitals scaled back operations or completely closed down. Such closures made access to life-saving medical operations, as well as food, extremely challenging.
  4. Unemployment as a Result of Scarce Fuel: Due to the economic crisis, private and public sectors are incapable of importing essential fuel and gasoline. To combat the extreme gasoline shortage in the country, the Lebanese government raised gasoline prices by 66% in August 2021. As a result, many low-income independent contractors, such as taxi drivers and bus drivers, could not afford to work anymore. Due to the recent unemployment of low-income families’ primary breadwinners, the Lebanese working class plunges deeper into poverty.
  5. Deteriorating Diets: Lebanon’s most vulnerable people continue to miss one important component at their dinner tables: meat. As the country’s currency continues to devalue, the prices of meat soar. Toward the end of 2020, “fresh and frozen cattle meat prices” in Lebanon increased by 110%, according to a World Bank assessment. Moreover, the prices of chicken witnessed a 68.4% increase over the last few months. With no other affordable protein sources readily available, malnutrition threatens Lebanon’s impoverished and hungry people. Furthermore, UNICEF reports that “three in 10 families” assessed in April 2021 “had at least one child” missing meals.

Beit El Baraka

As the factors mentioned above overlap, nongovernmental organizations (NGOs) launched several initiatives and efforts to aid Lebanon’s most vulnerable communities. One of the most prominent NGOs currently operating on a large scale within Lebanon is Beit El Bakara. The NGO is dedicated to helping Lebanon’s vulnerable families by covering medical expenses, paying bills and tuitions and providing meals and essential services. Since its launch, Beit El Baraka’s team helped more than 128 families pay their electricity bills, paid 93 families’ rental costs, covered the cost of treatment for 1,681 patients in need and refurbished 3,011 homes across 62 Lebanese areas.

The economic collapse in Lebanon is becoming increasingly dire. Without help, Lebanon and its people could face a catastrophic fate as more than half of the population sinks below the poverty line. Therefore, aiding the Lebanese population should be a top priority of the international community.

– Nohad Awada
Photo: Wikipedia Commons

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The Role of Remittances to Venezuela

Remittances to Venezuela
The International Monetary Fund (IMF) defines remittances as “money transfers from citizens working abroad” as a contribution to the household income of their families in their home countries. The IMF sees remittances as a “lifeline for development,” especially in impoverished countries such as Venezuela. In Venezuela, the influx of remittances is growing rapidly and represents a large source of foreign income for Venezuelans. While remittances typically take the form of cash transfers, crypto remittances to Venezuela are playing a larger role in facilitating international transactions and becoming a vital source of income for Venezuelans, especially during the COVID-19 pandemic while the country faces hyperinflation and U.S. economic sanctions.

The Role of Remittances in Global Poverty Reduction

Remittances directly bolster the income of households that receive these payments and provide essential resources for the impoverished. The value of remittances lies in the fact that governance issues often linked to “official aid” do not impact remittances. Instead, remittances are able to circumvent “red tape” because the money goes directly into the pockets of the impoverished. According to the World Bank, “a 10% increase in per capita official remittances may lead to a 3.5% decline in the share of [impoverished] people,” further showing that remittances play a key role in poverty reduction. Harnessing technology and non-traditional approaches for remittances allow Venezuelans the opportunity to send and access this funding in a faster and more efficient way.

The Resiliency of Remittances

Experts expected remittances to decrease due to job insecurity abroad as a result of the pandemic. However, the flow of remittances remained resilient. According to the World Bank, remittances to developing countries only dropped 1.6% in 2020. Digitization of payments allows for a steady flow of remittances to countries like Venezuela —  according to a report by Global System for Mobile Communications, “international remittances processed via mobile money increased by 65% in 2020.” In 2018, United Nations member states adopted the Global Compact on Safe, Orderly and Regular Migration, which recognizes the importance of remittances in the development of poverty-stricken countries such as Venezuela.

Cryptocurrency in the Context of Hyperinflation

As the bolivar continues to depreciate in Venezuela, cryptocurrency functions in a way that circumvents hyperinflation. Cryptocurrency is a decentralized form of currency, where its value does not stem from fiat currency or natural resources, but instead, derives from user demand. In 2021, the Venezuelan government introduced the 1-million-bolivar bill, which is equivalent to about $0.52, in an attempt to remedy the impacts of hyperinflation and economic sanctions. Venezuela has experienced hyperinflation due to falling oil prices, resulting in the government printing vast quantities of currency as a potential solution, but this only further devalued the bolivar. Increasingly, residents are turning to digital forms of payments. For example, street vendors in the Venezuelan capital of Caracas are accepting digital coins as a form of payment.

5 Benefits of Crypto Remittances to Venezuela

  1. Stability: Cryptocurrency remains steady compared to fiat currency, especially during times of inflation.
  2. Lower Fees: Commission fees for crypto remittances are lower in comparison to international transfer fees from companies like Western Union.
  3. Money and Time-Saving Costs: Research shows that crypto remittances “produce a 1% saving of income” because of the reduction of travel and wait time when sending remittances.
  4. Safety: Because Venezuela stands as “one of the most insecure [nations] in Latin America,” residents face the risk of theft when traveling with cash. Digital currency offers a degree of security and protection for people as their funds are stored on their devices.
  5. Continuing the Flow of Remittances: As the Maduro regime takes steps to further regulate remittances while rejecting foreign humanitarian aid, decentralized currencies could allow residents to continue receiving essential monetary flows.

Remittances to Venezuela’s Unbanked Population

According to the Global Findex Database, in 2017, close to 73% of Venezuelans had bank accounts and digital forms of receiving money are increasing each year as inflation devalues fiat currency and hyperinflation threatens the affordability of basic needs. More than 50% of transactions in the country use the U.S. dollar, and in 2020, experts projected that annual remittances would climb to $4 billion. The viability and sustainability of digital remittances, specifically cryptocurrency forms, are becoming more popular.

GiveCrypto Uses Cryptocurrency to Provide Aid to Venezuelans

As Venezuela continues to experience a financial crisis, cryptocurrency, such as Bitcoin, offers a degree of stability as an inflation-proof asset. Many nonprofits implement cryptocurrency in their strategies to bring aid to Venezuelans. In 2019, U.S.-based charity, GiveCrypto, “provided temporary assistance to hundreds of vulnerable families in Venezuela through weekly crypto deposits worth around $7,” which is equivalent “to the monthly minimum wage” in the country. This aid helped families purchase food and other essential goods.

In addition to aid, the organization provides resources that educate people about crypto apps to ensure that people have complete control of their digital currency. Efrain Pineda, the program manager, says, “We want to show that people who are not techies or investors can also benefit from this technology. Anyone can use crypto to protect themselves from inflation and make their daily life easier.”

Cryptocurrency Offers Hope for Venezuelans

With little end in sight for hyperinflation, Bitcoin is gaining traction as an alternative as traditional payment methods become regulated and overloaded. Venezuela ranks fourth globally for Bitcoin trade, and as more people flee Venezuela, digital forms of remittances continue to be an invaluable source of income for residents who remain.

– Jennifer Hendricks
Photo: Flickr

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Alleviating Poverty in Lebanon

Poverty in Lebanon
According to the United Nations, Lebanon is facing a significant economic crisis, with nearly three-quarters of the country living below the poverty line as of September 2021. This staggering poverty rate warrants assistance from the international community.

Lebanon’s Poverty in Numbers

In a 2019 report, the U.N. found that “between 2019 and 2020,” poverty in Lebanon rose “from 28% to 55%.” When looking at multi-dimensional poverty, the situation is even more severe. According to the World Bank, multi-dimensional poverty ratings look to “understand poverty beyond monetary deprivations,” by including six key indications: “education, health, public utilities, housing, assets and property as well as employment and income.” Lebanon’s multidimensional poverty rate almost “doubled from 42% in 2019 to 82% in 2021.” Furthermore, about a third of the Lebanese population has no access to adequate health care, a fact that is especially concerning in the wake of the COVID-19 pandemic. According to the U.N., close to 25% of the country could not meet their nutritional food needs by the close of 2020.

Additionally, by August 2021, Lebanon reached a record high unemployment rate of more than 35% — a sudden surge from the single-digit average throughout the past decade. With this crisis, the value of the Lebanese lira has also decreased by almost 80% against the U.S. dollar as a result of extreme inflation and economic deterioration.

Lebanon’s Deteriorating Economy

Investigations show Lebanon’s economic crisis could date back to the early 2010s, although the primary detriments of the surge appear at the beginning of 2019. Although there is no evidence that COVID-19 was a direct cause of this crisis, its effects certainly did not aid the economy when exports slowed immensely, thus stalling the country’s primary export industries. Additionally, World Bank experts predict that Lebanon’s economy may decline by 10.5% by the close of 2021.

Lebanon’s corrupt banking sector shares the blame for the country’s economic crisis. It lent the Lebanese government close to 75% of its deposits in early 2019. The result of this was “extreme bankruptcy.” Additionally, the political turmoil in Lebanon played a contributing role to instability — the nation had no official leader between 2014 and 2016. Experts believe the economic crash was inevitable with no proper leadership. According to an article by the Middle East Institute, Lebanon’s economy could see a decline “from $60 billion in 2018 to $15 billion” by the end of 2021.

World Bank Assistance

Despite how dire Lebanon’s situation may appear, hope is on the horizon. In January 2021, the World Bank Group announced the approval of “a $246 million new project to provide emergency cash transfers and access to social services to approximately 786,000 [impoverished] and vulnerable Lebanese” facing the impacts of both the economic crisis and COVID-19.

This initiative, the Emergency Crisis and COVID-19 Response Social Safety Net Project (ESSN), will also help implement “social safety nets” to improve the nation’s resilience and recovery in the face of “future shocks” or crises. To help people living in extreme poverty, the ESSN project will provide cash assistance to these individuals for 12 months. Additionally, the ESSN will provide a “top-up cash transfer” to 87,000 Lebanese children aged 13-18 to cover the costs of education, including uniforms, supplies and remote learning resources.

Lebanon’s economic crisis brings suffering to countless citizens. However, the World Bank’s ESSN poverty alleviation project has the potential to provide essential relief to the most vulnerable citizens, ultimately reducing overall poverty in Lebanon.

– Andra Fofuca
Photo: Flickr

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Agricultural Success in Zimbabwe

Agricultural Success in Zimbabwe
Zimbabwe, a landlocked country located in southern Africa, is experiencing improvements in the nation’s economy after “facing its worst economic crisis in a decade.” This crisis is the result of a drought as well as the impacts of the COVID-19 pandemic. Following this difficult period, however, the recent upswing in the economy is largely due to agricultural success in Zimbabwe. If this trend continues, the future looks promising for Zimbabwe and its citizens.

Agriculture in Zimbabwe

The economy in Zimbabwe, specifically in rural areas, is primarily reliant upon agriculture. The agricultural sector employs approximately 60%-70% of the population and is responsible for 40% of all export revenue. Due to this dependency, when agriculture in Zimbabwe struggles, the rest of the economy suffers as a result.

The Economy in Zimbabwe

In the past two years, Zimbabwe has endured a significant economic recession due to the COVID-19 pandemic and ongoing drought. In 2020, the GDP decreased roughly 10% and inflation increased from about 227% to a staggering 622.8%. However, more stable weather conditions now pave the way for agricultural recovery in Zimbabwe, which, in turn, is now fostering economic improvement.

Tafadzwa Gamanya, a small farmer in rural Zimbabwe, has had a productive season for his crops due to the end of the drought. “This year is much better for us here,” Gamanya tells VOA. “We had good rains. We have enough water to irrigate our crops until the next rain season.”

Confirming these favorable conditions, the Zimbabwe Meteorological Services Department reports that Zimbabwe is witnessing statistically average to above average amounts of rainfall during this crop season. The support of the government also plays an integral role —  government initiatives “ensured that farmers had adequate inputs on time for the 2020/21 cropping season.”

During December 2020 and January 2021, some parts of the region experienced “wet spells,” greatly contributing to the significant crop yield. The farmers welcome this change in comparison to the drought that previously ravaged the nation.

Minimizing Food Insecurity

Along with economic improvements, agricultural success in Zimbabwe reduces food insecurity in the nation. The country notes that the 2021 harvest is “capable of feeding” the entire population of 14.65 million people over the course of “the next year.”

The 2021 maize harvest is so large that, in May 2021, agricultural authorities placed a ban on importing the crop. This stands in stark contrast to Zimbabwe’s $298 million expenditure on maize imports during the 2019-2020 drought season. These savings are tremendously helpful to the Zimbabwean economy.

The Road to Recovery

As rains begin to stabilize and businesses are able to recover from the impacts of COVID-19, World Bank experts anticipate that Zimbabwe’s GDP may climb to 3.9% by the close of 2021. Bringing even more hope to the nation, experts predict that Zimbabwe’s GDP may rise by 5.1% in 2022 if the pandemic or other factors do not interfere with current trends.

After a difficult two-year recession, Zimbabwe’s economy is finally on the road to recovery. While businesses are beginning to rebound following the most severe impacts of COVID-19, agricultural success in Zimbabwe is further contributing to economic improvement. The nation’s GDP is growing and the number of food-insecure Zimbabweans is shrinking. While there remains room for progress, Zimbabwe’s current economic course shows that the nation is heading in the right direction.

– River Simpson
Photo: Flickr

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A New Initiative to Combat Poverty in Afghanistan

New Initiative to Combat Poverty in Afghanistan
Afghanistan is on the brink of disaster. Immediately after the United States’ exit from Afghanistan in August 2021, the Taliban assumed full power, seizing the nation’s capital, Kabul. Just months later, the United Nations Development Programme (UNDP) estimated that Afghanistan’s $20 billion economy could shrink by 20%, plunging the nation further into poverty. However, the international community is not turning a blind eye. Instead, UNDP has launched a new initiative to combat poverty in Afghanistan.

UNDP Launches ABADEI

In October 2021, UNDP launched the Area-based Approach for Development Emergency Initiatives, also known as ABADEI. ABADEI is a new initiative to combat poverty in Afghanistan and is a part of a broad effort to “operationalize a basic human needs approach within the complex and fast-evolving context of Afghanistan.” UNDP explains the ABADEI strategy best, stating that ABADEI “provides an articulation of investments in basic services, livelihoods and community resilience that complement humanitarian efforts by helping households, communities and the private sector cope with the adverse effects of the crisis.”

Specifically, ABDEI has the backing of a Special Trust Fund for Afghanistan. UNDP created this special trust fund in October 2021 to provide cash assistance to Afghans in dire need, independent of a third party. Germany was the first country to financially commit to the trust fund, pledging nearly $60 million. The trust fund has since grown to more than $170 million in December 2021.

ABADEI, then, is the strategy that directs the flow of the money. Under the ABADEI initiative, program coordinators will implant funds into the community in four main ways.

4 Main Funding Channels

  1. Allotting grants to microbusinesses. A 2019 OECD report on private sector development and entrepreneurship in Afghanistan estimates that entrepreneurs and small and medium enterprises (SMEs) account for nearly 99% of businesses in the country. The report also states that “with foreign assistance declining and the country still struggling to attract private investment from abroad, Afghan entrepreneurs and SMEs will have to be the engines for much of the needed development.” This first goal particularly seeks to assist women-owned businesses as women face disproportionate impacts of poverty during times of crisis. Under ABADEI, program coordinators will distribute cash in local currency and assess needs with the help of local community leaders. The U.N. hopes that the direct injection of cash will help keep local economies from collapsing.
  2. Cash-for-work projects. The second goal of the initiative is to provide “short-term income to the unemployed.” USAID data from November 2021 indicates that nearly 40% of Afghans endure poverty. In 2020, before the Taliban took over, unemployment stood at slightly less than 12%. Although there is no official number for the rising unemployment rate, reports indicate that people are resorting to selling their own possessions to survive.
  3. Financial support to at-risk populations. The director of the U.N. Food and Agriculture Organization, Qu Dongyu, states that women, young children and the elderly are at risk of starvation during the winter in Afghanistan. To mitigate these impacts, ABADEI seeks to provide a “temporary basic income” to the at risk-populations of Afghanistan.
  4. Strengthening natural disaster resilience. Afghanistan is prone to natural disasters including flooding, earthquakes, landslides and droughts. ABADEI will help Afghanistan mitigate such disasters by funding the “rehabilitation of canals” and other “flood protection” strategies to safeguard farming land from the destruction of floods. By preemptively protecting farmland, ABADEI aims to reduce the risk of increasing food insecurity in the nation.

Looking Ahead

Achim Steiner, a UNDP administrator, said at a press conference that “ABADEI is a concrete contribution to the efforts of the United Nations to protect the hard-won development gains achieved over the past 20 years and prevent further deterioration of Afghanistan’s fragile local economy.” Though the future of Afghanistan is unclear and the country faces numerous challenges, ABADEI stands as a new initiative to combat poverty in Afghanistan, marking an integral first step in the international community’s efforts to safeguard the well-being of Afghans after the Taliban takeover.

– Richard Vieira
Photo: Flickr

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Peru’s Economic Growth Predicted to Exceed 13%

Peru’s Economic Growth
For several decades, the World Bank classified Peru’s economy as one of the fastest-expanding economies. While this is true, this expansion slowed between 2014-2019. This led to an 11.1% drop in economic growth in 2020 as a result of the COVID-19 pandemic. The drop caused job sectors to slow down, though others surged in their place. Despite the fall, there is good news: Peru’s economic growth could increase by 13% at the end of the fiscal year 2021.

What is Economic Growth?

The improvement or decline in the market value of goods or services produced measures economic growth. The more goods and services produced or traded, the more money that goes to the economy. The changes in a country’s Gross Domestic Product (GDP) typically measure economic growth. With economic growth comes increased salaries, job availability and standards of living.

There are two primary methods to improve economic growth: improved goods, both technological and physical (capital) and tools that help increase production. Both avenues traditionally lead to economic growth. In this case, both methods explain why Peru’s GDP had a decline in 2020 and how Peru’s economy has recovered since then.

Peru’s Economic Foundation

Peru’s economy has experienced its ups and downs. The economy is based in the services sector, with telecommunications and financial services being the most significant. Services contribute to 60% of the overall GDP, with industries providing 35% to the GDP. However, reforms in the industry are a result of the changes in the mining industry. As Peruvian industries shrink, the telecommunications and services sectors grow.

Although mining was the primary source of income for Peru’s economy, the industry had the highest recorded fall in production ever. Many mining companies had to minimize the number of workers they could allow at a time in the mines and processing plants. The minimization cut production and output with a 13% reduction in copper production and processing. With the reduction in mining work and production output, other sectors stepped up to fill the job gap and start contributing to Peru’s GDP more significantly than in the past.

Improvements in 2020 and 2021

The downturn in Peru’s economy in 2020 left 27% of the population in poverty, as the World Bank reported. The additional 2 million people who slid into poverty highlighted the growing poverty rate in Peru. However, hope is on the horizon.

Due to the COVID-19 pandemic, the telecommunications sector expanded. Before the COVID-19 pandemic, telecommunications were slow to grow in Peru. Back in 2012, the Peruvian government passed law 29985, explicit approval of the usage of electronic money. Law 29985 showed the government’s willingness to explore technology and expand its place in Peru. However, there were still barriers to the use of e-money. In 2012, many Peruvians still lacked access to the internet, computers, and technology needed to access e-money.

Advantages of Technology

Technology in Peru improved in 2020 when most services, including banking, went remote. The number of individuals using e-money increased by an average of 1,000 new users in specific e-money platforms a month. With new internet platform users and increased internet usage came new jobs and the potential for economic gain.

Historically, increased online usage leads to job opportunities through expanded internet and broadband access, especially in areas that lacked immediate internet access. In 2020 and 2021, there were increases in job openings and hirings in the telecommunications sector across Peru. Jobs in telecommunications filled rapidly in 2021, with the most considerable growth taking place in June 2021.

Expected Economic Growth

Telecommunications and its contributions to Peru’s economy have steadily climbed since 2014. In 2019, telecommunications generated a revenue of approximately $6.3 billion. With the expected economic growth stemming from growing telecommunications, the sector’s contributions to the GDP could be even higher by the end of the year. This could make telecommunications one of the most significant contributors to the GDP in Peru’s service sector.

With the newly opened and added jobs, the Peruvian services and telecommunications sectors have grown. This is allowing the sectors to increase their income and contributions to Peru’s economy. Thus, enabling the GDP to expand and retain economic growth as well. As the market opens and job availability grows, the Peruvian government predicts that Peru’s economic growth will grow by 13%. With Peru’s projected economic growth, there is an excellent likelihood that the poverty rate could shrink at least 1% to 2%, if not more.

– Clara Mulvihill
Photo: Flickr

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Impact of COVID-19 on Poverty in Thailand

COVID-19 in Thailand
COVID-19 and the economic consequences of its spread have caused greater levels of poverty in Thailand since 2020. Reports determined that the COVID-19 pandemic plunged almost 800,000 people into poverty in 2020. The impact of COVID-19 on poverty in Thailand has primarily manifested as a spike in unemployment. By spring of 2021, Thailand’s job market had 710,000 fewer jobs compared to the previous year. The pandemic also adversely affected tourism flow to the nation, which accounts for about a fifth of GDP and 20% of employment. Thailand’s economy and poverty levels have not experienced such a negative impact since the Asian Financial Crisis of 1997.

Government Initiatives to Mitigate Poverty

The government’s initiative, however, in responding to this crisis has somewhat curbed the pandemic’s potential for further devastation. Authorities were quick to introduce quarantine measures that were effective in containing the virus during most of 2020. Though several waves of infections have exacerbated the impact of COVID-19 on poverty in Thailand, the policy packages were effective in creating fiscal stimulus.

The support ranged from financial assistance for debtors to health-related spending for affected households, including those outside the social security system. Simulations suggest that more than 780,000 additional people could have fallen into poverty in 2020 if the government had not bolstered social support.

Thailand’s Continued Alleviation of Poverty

Thailand’s efficient response to the pandemic is impressive, but not surprising. Since 1988, the country has reduced its poverty levels from 65.2% to 6.2% in 2019, according to the World Bank. Its most effective initiative was to scale up cash transfer programs such that it became one of the largest scale fiscal responses to COVID-19 in the world.

“The crisis in 2020 demonstrated Thailand’s ability to leverage its robust and universal digital ID, sophisticated and interoperable digital platform and a number of administrative databases to filter eligibility for new cash transfer programs,” said Francesca Lamanna, the Senior Economist at the World Bank.

The Current Status of Poverty Levels in Thailand

While the government has responded relatively well, the country continues to struggle as it enters the fourth wave of COVID-19. The official unemployment rate was 2% in the first quarter of 2021 due to COVID-19, with the loss of jobs most concentrated in the services sector. On the one hand, slow vaccination rollout and widespread doubt seem to be stalling recovery. On the other, some infected individuals living below the poverty line may go so far as to violate quarantine rules in order to continue earning much-needed income.

The impact of COVID-19 on poverty in Thailand and its economic dependence on contact-intensive sectors means the continuing waves of infection prolong unemployment, with financially vulnerable groups bearing a disproportionate burden of economic insecurity.

Volunteer Workers Spearhead Poverty Aid Missions

In response to these conditions, the number of volunteers in Thailand has also been surging. Bangkok Community Help is one such organization. It has grown to more than 400 participants since its founding early in the pandemic in 2020. Greg Lange and Friso Poldervaart are two restaurant owners that spearheaded the community initiative after neighbors approached them to inquire if they could use their empty restaurant kitchens to prepare hot meals.

While the scale has transformed considerably, Bangkok Community Help’s main objective remains to assist vulnerable sections of Bangkok through volunteer and donation initiatives. “After [last April and May], we decided to focus more on more long-term projects, like building houses for people, turning a garbage dump into a park, and teaching kids,” Lange and Poldervaart told TimeOut.

Donations vary in scale and source. Individuals may hand out meals they prepared themselves to hungry construction workers, while foreign aid initiatives fund larger-scale operations such as survival packages of preserved goods. Australian Aid paid for rice recently distributed outside of Bangkok’s main port facilities through the Australian Government Aid Program. The program provides small grants in support of local, non-governmental organizations in Thailand.

The New Zealand – Thai Chamber of Commerce, an organization dedicated to promoting commerce between Thailand and New Zealand, donated apples. These organizations have even employed volunteers to bring oxygen tanks to the homes of the infected when hospitals were overcrowded, in the hopes of keeping them alive until a hospital bed becomes available. Bangkok Community Help continues to inspire individual and government action through its aid, opening aid centers and converting unused schools and auditoriums into treatment centers.

Future Possibilities

Looking towards the future of COVID-19’s impact on poverty in Thailand, there are different projections. The devastation of the pandemic is a large-scale issue that called for radical measures, but the methods of mitigation employed may be useful in shifting political focus towards strengthening social support systems in the future. These circumstances have the potential to catalyze an economic reform in Thailand, such that its industries can become more digital.

According to the International Monetary Fund (IMF), the authorities see this as an opportunity to transform tourism from low-cost, high-density travel, to high-end, low-density travel. This would allow for other domestic industries to flourish without wreaking havoc on the country’s economy. It may also be more ecologically friendly, offering greater protection of natural resources on which the tourism industry is dependent. All of these factors have the potential to gradually reduce the number of people living below the poverty line, by strengthening Thailand’s social and fiscal fiber.

– Arahi Fletcher
Photo: Unsplash

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Argentina’s Informal Peso Hit New Low

Argentina’s Informal Peso
Argentina’s informal peso, its ”dolar blue,” weakened drastically at the end of October 2021 and hit its all-time inflation high. The country’s risk rating increased by 19 points. The economic downturn arrived weeks before Argentina’s November 2021 elections, and economic improvement is long overdue.

What is the Dolar Blue?

The “Dolar Blue” is the unofficial rate of buying or selling physical United States dollars (USD) in an unofficial financial market in exchange for Argentine pesos. The transactions occur without the assistance of a banking institution or government oversight. Many transactions for Argentina’s informal peso occur right in storefronts or in the street.

In October 2021, the exchange rate hit 195 pesos per one USD. The exchange rate is typically greatly valued because this trade rate results in more pesos to the dollars for tourists and vice versa for those looking to use pesos.

In 2019, the Argentine peso lost value during an economic crisis due to suspending debt payments while the debt continues to climb for Argentina. The government had to act quickly to stabilize the peso. Since then, the Argentine government has slowly placed restrictions on the dolar blue to prevent any weakening of the formal peso.

What is a Country’s Risk Rating?

A risk rating is the measurement of the potential for non-payments on international loans that companies made to companies within the country being rated or to the countries themselves. It is the measurement to see how close a country is to defaulting on loans. Typically, the factors that lead to an increased risk rating are out of a countries’ control. However, the risk rating is the calculated risk that international businesses would undertake when dealing with the measured country. The higher the number, the greater the chances of business deals collapsing.

As Reuters reported, the risk rating for Argentina expanded 19 points when Argentina’s informal peso reached its all-time high of 1,672. It is essentially Argentina’s credit rating, but the higher the number, the lower the chance for foreign investment opportunities. This new risk rating could lead international companies or loan businesses to avoid working in Argentina or setting up loans there.

Without additional investment, the job market could have few opportunities to develop new jobs. There is little chance that unemployment rates could decrease.

Why Did this Economic Crash Happen and What Does this Mean for Argentina?

The two main factors causing the current economic crash are the country’s upcoming elections and growing inflation. The majority of surveyed Argentineans’ stated that their largest concern was the economy. Argentina has a history of economic downturn during periods of change in political leadership and growing economic fears. Argentina’s informal peso and formal peso have fallen in the past during periods similar to what the nation is experiencing now.

The drop in Argentina’s informal peso means economic growth has stagnated once again. Financial experts predicted Argentina’s impending devaluation of its formal currency, which appears to have started with the devaluation of its informal peso. With the devalued informal peso, battling inflation rates, four out of 10 Argentines live in poverty and have few means of escape.

Argentineans in poverty are struggling with the prices of necessities and with inflation. This is impacting both formal and informal pesos and the outlook is dour, according to The New York Times. Argentina’s informal peso brought tourists and new businesses to the country to support local Argentine companies and operations. With a destabilized and devalued the informal peso, more Argentineans are at risk of losing income. The devaluation of Argentina’s informal peso and widening country risk signals a long way to go before returning to a stable economy.

Is the Outlook Truly Grim?

The outlook is not entirely dismal. As grim as things look for Argentina economically, there are ways forward with the devalued informal peso.

In September 2021, Argentina reported economic growth. The poverty rate decreased slightly, which came as a pleasant surprise to many. In the first half of 2021, the poverty rate decreased to 42% and shows signs of continuing to decrease. Many did not expect the growth, given the difficulties of the COVID-19 pandemic. However, the growth signals that there is a chance for improvement despite the downturn of the peso and the risk rating.

In the weeks following the elections, the economy is likely to stabilize again. After the 2019 election, while the pesos’ exchange rates were still higher than average, they stabilized briefly. However, the recovery was short-lived due to the COVID-19 pandemic. Since then, the economy has struggled to restabilize. In the days since the COVID-19 pandemic first impacted Argentina, the economy has been slowly stabilizing and working towards recovery.

 After the 2021 November elections, there is a good chance for economic recovery and stabilization. Argentina’s informal peso could recover and the risk rating could decrease. The economy could revitalize with new business and partnerships.

Support for Argentina

Argentina has faced economic issues for several years, but they are not alone and receive help from many organizations, including The Working World (TWW). Brendan Martin founded TWW after witnessing the result of the Argentinean economic difficulties. The efforts on the ground that individuals made to start businesses and launch democratically operated businesses boosted the economy, and TWW decided to continue supporting this trend.

TWW works by partnering with businesses interested in furthering their workers’ rights to make decision-making processes more equitable. The organization designs loan packages to give the loans to pre-set projects that are in the hands of workers and repayment requires minimal interest.

TWW is a registered nonprofit organization in both the United States and Argentina. It understands the various currencies in Argentina, the exchange rates and the impacts both have on the Argentine economy.

Around the time TWW formed in Argentina and began democratizing businesses and stabilizing the workforce, the informal and formal peso stabilized in the exchange rates. Since then, TWW has expanded operations to more countries to transplant these business models and provide job security in countries. One example is Nicaragua or areas hit that hurricanes hit in the U.S. while maintaining some operations in Argentina.

TWW’s work has been invaluable in stabilizing the economy and workforce. The economic difficulties that inflation and political instability caused are manageable, largely because of nongovernmental organizations like The Working World.

– Clara Mulvihill
Photo: Unsplash