COVID-19 partly reversed gains made in three decades of sustained decline in poverty and a decade of accelerated reduction in inequality. In 2020, the pandemic halted economic growth momentum and unemployment shot up in industries that require in-person work. In 2021, poverty rose 1.4 percentage points to 18.1 percent despite substantial government assistance to households and firms.

Although the economy is recovering gradually, there are signs that the recovery may be uneven.

In March 2022, employment in wage work was lower than its pre-pandemic level; meanwhile, the share of workers in agriculture, self-employment or unpaid family business was higher than it had been before the COVID-19 crisis. These trends have been concentrated among youth and the least educated, which suggests an uneven recovery.

Income recovery also seems to be slower for the poor. While households in both the richest and poorest quintiles reported income loss when the crisis began, by May 2022, 40 percent of households in poorest groups reported income decline compared to 19 percent in the richest. The sectors where the poor work, the sluggish recovery of nonfarm businesses, and the fall in domestic remittances have in varying degrees slowed the recovery of incomes of the poor.

The COVID-19 pandemic may have long-term negative impacts on development of human capital.

To manage the pandemic shock, a considerable number of poor households have relied on such adverse coping mechanisms as reducing food consumption, which may aggravate already prevalent child malnutrition and stunting. The challenges associated with distance learning during the pandemic could also have an adverse effect on the educational attainment and learning outcomes of youth. Children from poorer households are placed at even greater disadvantage because they had less access to resources that could help support remote learning.

Policy needs to be directed to support an inclusive recovery and to address enduring medium to long term impacts of the COVID-19 pandemic. Policy priorities can be structured around healing the pandemic’s scars and building resilience, and setting the stage for a vibrant and inclusive recovery.

Policies can provide vulnerable groups with enough support that they can absorb shocks as the crisis unfold and increase their resilience through: increasing booster vaccination uptake; strengthening social protection programs; mitigating the impact of inflation on vulnerable households; and overcoming the pandemic-related learning losses. Policies for a strong and inclusive recovery can include: reskilling and upskilling of the workers most affected by labor market disruptions to support their redeployment and increase their resilience; boosting skills for a transition to a more productive economy; promoting women’s employment through more flexible work arrangements; and expanding opportunities for women’s re-entry to the labor market.