World Bank: Crisis could push 3.6 million Brazilians into poverty

The economic crisis could push as many as 3.6 million Brazilians below the poverty line by the end of the year, according to a World Bank study on the impact of recession on Brazilians' incomes. This number was obtained considering that Brazil's GDP would shrink 1% in the period going from the second half of 2016 to the first half of this year (fiscal year 2016/2017).

In a more optimistic scenario where the country's economy grew 0.5% over that period, the number of poor people would increase by 2.5 million according to the World Bank.

For the purposes of the study, people earning less than R$140 ($44.91) a month were considered to be below the poverty line. According to the World Bank, the “new poor” will come mostly from urban areas, whereas the increase in rural poverty will be smaller because vulnerability is already higher in the countryside.

Welfare program

The study examined the impact of the increase in poverty on the Bolsa Família conditional cash transfer program. According to the World Bank, 810,000 families would become reliant on the benefit in the optimistic scenario (0.5% economic growth), or 1.16 million in the worse scenario (with the country's GDP shrinking 1%).

Currently 14 million families are enrolled in the Bolsa Família program, according to the Ministry of Social and Agrarian Development.

The World Bank has recommended the program be expanded to help mitigate the impact of the crisis. “The depth and duration of the current economic crisis in Brazil creates an opportunity to expand the role of the Bolsa Familia, which could grow from an effective redistribution program to become a true safety net program that is flexible enough to expand its reach to the homes of the 'new poor' produced by the crisis,” the study read.

According to the World Bank, Brazil has been able to create one of the world's largest social safety nets. It recommended the budget for the Bolsa Família program should increase above inflation to expand its coverage of an increasingly poor population. In the best scenario, the program's budget should rise 4.73% above the 2015-2017 cumulative inflation; based on the pessimistic projection, the increase should be 6.9% above inflation.

In nominal terms, the program's budget would go from $8.46 billion at the end of 2015 to $9.75 billion this year in the GDP growth scenario or $9.95 billion in the decline scenario. While the study has not considered the effects of the spending cap introduced by the government this year, it does estimate that the austerity policy would not be impacted by an expansion of the Bolsa Familia program.

Translated by Mayra Borges