World Bank: 1.4 million Peruvians fell into the bowels of poverty in 2022

The World Bank estimates that, at the end of 2022, 31.8% of the Peruvian population is poor —a third of the total, considering that there are 10 million 812,000 people. Although in the coming days he will give the specific figure on the poverty ratio for the third year of the pandemic, he specified that almost a million and a half citizens live in this situation or are at risk of falling: 700,000 Peruvians went from middle class to vulnerable and another 700,000, from vulnerable to poor.

Inflation and precarious employment, the culprits

Tanja Goodwin, Program Manager for Equitable Growth, Finance and Institutions at the world Bank, remember that the achievements seen in the macroeconomic recovery from the pandemic have been reversed, to the point that gross poverty is at levels prior to the coronavirus outbreak, specifically due to high inflation and the slow recovery of the labor market. It is worth noting that inflation closed 2022 at 8.46%, its highest rate in almost three decades, and, of the 17.7 million workers, more than half are informal.

Also, another point against is the gender gap. The Peruvian labor market has a lower female participation and a greater involvement of women in underemployment, to the point that, on a monthly average, they bill 25% less than men, according to data from the National Institute of Statistics and Informatics (INEI). .

Goodwin warns that we are at a critical moment, in which people in the vulnerable strip can descend into poverty in the face of any shock. How to reverse the problem? The economist maintains that inequality can be reduced through the tax system, making more collections from those who generate and earn the most, in order to provide basic services to the country; but in Peru, being suffocated by informality, it is difficult to maneuver along this route.

“There are few taxpayers and here the weight of the collection falls on the IGV, which is a regressive tax. You have to think about making adjustments to the tax system and broadening the base by attacking informality,” he says. However, unlike the International Monetary Fund (IMF), Goodwin acknowledges that for now they are not contemplating applying a wealth tax, as former Economy Minister Pedro Francke bet at the time – although this initiative was annihilated by Congress.

Can you grow less than expected?

The WB waits for the GDP closed this year at 2.4% —three percentage points less than the MEF—; however, the rate could contract if there is greater severity in natural disasters, political volatility and rising inflation. Meanwhile, on the external side, the risks are rapid adjustments in international interest rates and that the prices of raw materials fall back.

“If these events materialize, business confidence would end and that could, in some way, impact growth prospects,” says Daniel Barco, a senior economist at the World Bank in Peru. However, he indicates that there are factors that could help us grow more, such as the economic recovery of China, our main trading partner, and the price of copper, one of our most demanded products abroad.

Noticeable decline only in 2030

Let us remember that the Government of Dina Boluarte launched the National Development and Social Inclusion Policy a few months ago, with which it is expected to reduce monetary poverty to 20% only in 2030, under a “transversal and multidimensional” approach to close the gaps that determine the quality of life of Peruvians. Besides, The World Bank expects that poverty in our country will remain above 30% until 2025.

The word

Tanja Goodwin, Manager of the Equitable Growth, Finance and Institutions Program at the World Bank

“Access to public services such as water or internet must be expanded (…). Homes must be resilient to shocks. Social protection must be adopted to an urban approach, not a rural one”.