National Estimate of “New Poor” Remains High in May 2022 Due to Inflation and Slower-Than-Expected Recovery

The ongoing inflationary pressures have negatively affected the real income, food security, and essential household expenditures of the low-income households in Bangladesh and significantly disrupted their economic recovery from the COVID-19 shock. In a virtual press conference on 5 June 2022, titled Inflation, Coping, and Recovery Challenges, Dr Hossain Zillur Rahman, Executive Chairman of  Power and Participation Research Centre (PPRC), and Dr Imran Matin, Executive Director of BRAC Institute of Governance and Development (BIGD), highlighted these trends. 

They presented these findings from the latest round of a survey in a joint PPRC–BIGD study, which has been capturing, since April 2020, the evolving economic crisis among low-income communities in Bangladesh due to COVID-19 through multiple rounds of surveys among a large sample of urban slum and rural population. Almost 4,000 households were surveyed in the fifth round conducted in May this year. 

They show that per capita daily incomes were steadily recovering after the second lockdown—which increased by a 27% from August 2021 to January 2022— but has started reversing again by a 6% between January and May 2022 due to inflation, disrupting the expected recovery of real incomes to that of pre-pandemic times. 

Dr Rahman said, “Inflation has compounded the COVID-induced disruptions to economic recovery, with real incomes of poorer households still 15% below pre-COVID levels two years from the onset of the pandemic. Bangladesh now faces a new risk—the reversal of meeting the targets of nutrition and education set in the Sustainable Development Goals.” 

The recent fall in daily per capita real incomes in the urban slums (8%) has been sharper than that in the rural areas (3%). Livelihoods in urban slums were already more severely affected by COVID and recovering more slowly, compared to those in villages. The inflation has further slowed the recovery in the slums. 

The inflationary pressure also appears to have pulled more women to find work; 40% of female respondents in the survey were engaged in income-generating activities in January, which jumped to 52% in May, but the longer-term is still grim for women—36% women in the sample who were working pre COVID still remains to out of work

Because of rising prices, most of the surveyed households have drastically reduced or stopped the consumption of major food items such as fish, meat, milk, and fruit, since February. Here too, the reduction in quantity and quality of food consumption has been more extreme in the urban slums than the rural areas. As of May, one in five urban slum households had also skipped at least one meal in the last month due to a lack of money. 

Compared to August 2021, more households were depending on their own incomes and production for their food needs in May 2022, as opposed to loans, dues from shops, and help from relatives. This seems to be a positive development. However, 38% of the households also said they needed to borrow more money but could not, mostly because of reasons like inability to repay or existing large debt burdens, indicating that many of these households are under severe financial stress. Moreover, since February 2022, two-thirds of the households have reduced non-food expenditures, including a worrying decrease in medical and children’s education expenses. The households are also buying less and buying lower-quality goods to cope with the price hike. 

Compared to last year, the purchase of fair price rice has increased in May 2022, among both people below and above the poverty line. There has been a corresponding change in the purchase of TCB food, 38% of surveyed HHs bought from TCB since February 2022. Despite this, there is a large unmet demand. Only less than 5% HHs said that they did not need TCB food. Over half of the households admitted they needed to buy from TCB but could not for various reasons, including not finding the opportunity or not having a TCB Family Card. A fifth of them said they were unable to complete their purchases due to the long waiting time. Though the overall satisfaction of those who purchased from TCB was high, two-thirds of them also mentioned long queues as a big challenge in purchasing. The survey indicates the need for a vast expansion of TCB and similar programs for poor urban and rural households. 

More than half of the households believe that the price hike is due to governance issues. The majority want the government to punish the syndicates and corrupt businesses, while a third suggested reducing prices, particularly for low-income households. 

Some worrying longer-term trends have also transpired from the latest round of the survey. First, an undesirable convergence of incomes among different economic groups has emerged. The income of the non-poor and vulnerable non-poor has fallen much sharply compared to their poorer counterparts and has recovered more slowly, particularly for the vulnerable non-poor, resulting in this undesirable convergence. Second, a third of the female respondents who were employed before the pandemic is still out of work. Finally, the national estimate of the “new poor” remains high at 18.54% in May 2022 due to inflation and the slow recovery among the vulnerable non-poor. 

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