World Bank: COVID-19 is hitting lives and livelihoods, wreaking havoc on BiH economy

World Bank: COVID-19 is hitting lives and livelihoods, wreaking havoc on BiH economy

SARAJEVO, October 18 (FENA) – The coronavirus (COVID-19) pandemic is wreaking havoc on the economy of Bosnia and Herzegovina (BiH), causing great damage to firms and labor markets. While incomes and employment opportunities are shrinking, lack of data makes it impossible to estimate the increase in poverty and hampers the ability to identify the most vulnerable households and to design effective policies to respond to the expected surge in poverty, it was published on the World Bank website in a text authored by the bank’s economists Leonardo Lucchetti and Jamele Rigolini.

Before the pandemic struck earlier this year, the economic outlook was positive. However, the pandemic has reversed that trend, and the country is now facing the largest recession since the global financial crisis. As a result, the number of individuals in paid employment declined by about 3 percent, as of July 2020 compared to the same time in 2019, and the number of citizens registered as unemployed increased by more than 19,000.

In the absence of current poverty data (the latest are from 2015), we conducted a simulation analysis to forecast the impact of the pandemic on poverty, i.e. people living on less than $5.50 a day. The results show that more than 85,000 individuals could be impoverished if there were no government responses in BiH and that many of those likely to fall into poverty were not covered by social protection programs before the pandemic hit.

Preliminary results of a recent online survey we conducted through a market research agency also provide some evidence of the disproportionately negative effect of the pandemic on vulnerable groups. The survey was conducted from June 5 – 19, and 2,009 adults were interviewed. Roughly 45 percent of those surveyed lived in a household where someone had lost their job or seen their hours of work cut or been put on unpaid leave. A similar proportion of respondents experienced a reduction in household income.

These impacts varied across different socio-economic groups, with the less well-off, less educated, and women among the hardest hit. Perceptions about the future were also pessimistic, with approximately a third of survey respondents saying they will not be able to make ends meet in the next month.

Both BiH entities introduced policy measures to protect firms and households, such as subsidizing minimum wages and social security contributions in companies affected by the COVID-19 crisis.

These response measures may have somewhat alleviated the impacts of the initial shock; however, since data on the evolution of incomes and consumption are not being collected, their overall mitigating effect on poverty is not well known. And despite being highly informative, the types of online surveys we have implemented can hardly be considered a substitute for official poverty estimates, as the surveys are likely to be biased and not representative of the entire population of a country. While it would be difficult to field face-to-face surveys during the pandemic, the availability of more recent poverty data than 2015 would have made our simulations more accurate.

It is easier to improve what you can actually measure

The lack of official poverty data since 2015 may be affecting the country’s ability to design effective policies and assessing the impacts of its social programs. To be effective, political discussions and policy decisions must be based on solid, widely accepted data and objective facts. Without data, beliefs, not facts, drive people’s and policy-makers’ decisions, affecting countries’ ability to design effective policies and, ultimately, their ability to grow and prosper. Making surveys widely available also allows more people to look at problems from different angles and propose creative and innovative solutions to complex policy challenges.

This crisis has illustrated the need for BiH authorities to take decisive actions towards adopting transparent data policies, fielding regular surveys to monitor the pulse of the country and making the information publicly available in a timely manner.

Only in this way, it will be possible to identify proactively the issues that are affecting the population the most, design policies and actions that are tailored to the specific issues that need to be addressed and verify that those actions achieve the results expected. In absence of reliable and timely data, we are flying blind through the current storm and will have fewer ability to avert future ones, published the World Bank on its website.