400,000 new poor and 9% increase in inequality due to covid-19 in portugal

PROSPER (Católica-Lisbon's Center of Economics for Prosperity) from Católica Lisbon School of Business & Economics in partnership with Fundacion La Caixa has just released a study that aimed to assess the impact of COVID-19 on poverty and inequality in Portugal, as well as the mitigating effect of public protection policies.

What was the impact of the Covid-19 pandemic on poverty and inequality in Portugal? What was the role of extraordinary protection policies in mitigating these effects of the crisis? Based on a simulation of annual incomes in scenarios with and without the crisis, this study estimates that, even with the crisis protection policies implemented in 2020, the pandemic led to a 25% increase in poverty (measured by the poverty rate) and a 9% increase in inequality (measured by the ratio between the 95th and 5th income percentiles) seen by comparing the scenarios with and without the crisis.

According to PROSPER, without the implementation of such mitigation policies, the initial eight-week confinement would have produced roughly the same impact on poverty and inequality as that estimated for a full year.

Thus, this Study, released today, concludes that there are currently 400 thousand new poor people in Portugal because of the Pandemic.

Also according to PROSPER, Pandemic Covid-19 is inevitably linked to the social and economic crisis that it triggered. This study shows that the simplified lay-off scheme for employees and the extraordinary support for the self-employed were effective in mitigating the impact of the crisis.

The still ongoing pandemic and the resulting economic crisis bring substantial fiscal challenges, as large-scale government efforts may be difficult to sustain for an extended period. In light of these findings, it is clear that without a strong recovery, a reduction in protection policies can have a substantial negative impact on poverty and inequality.

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