The global financial crisis could push 11 million more people into poverty and another 23 million to the brink of poverty in eastern Europe and central Asia by 2010, according to a new World Bank report.
The revealing study of how families are dealing with the effects of the crisis shows they are being hit by the credit market squeeze, rising prices, and growing unemployment.
"The global financial crisis risks reversing the substantial gains and improvements in living standards," said Luca Barbone, director for Poverty Reduction and Economic Management in the World Bank's Europe and Central Asia region.
The region has been among the hardest hit worldwide by the global financial turmoil that has pushed many countries into a deep economic recession. Easier access to credit during the region's economic prosperous years helped families but also exposed them to potential market shocks.
During previous crises, families could rely on second jobs or went abroad to find work but the global nature of the current crisis has made such fall-backs almost impossible.
The World Bank said middle-income countries that have experienced the largest economic contractions will also see the steepest rise in poverty.
Stress testing by the poverty-fighting institution on households showed that interest rate rises, exchange rate shocks and stretched incomes could increase the number of families unable to pay their debts, the report said.
For example, up to 20 percent more families with mortgages and other loans in Lithuania, Estonia and Hungary could be at risk of defaulting on their loans, the report said.
While global food and fuel prices are lower since reaching record highs last year, prices have not returned to pre-2007 levels, the Bank said. Falling currencies in some countries in the region have prompted a new round of price increases, it added.
High food prices are especially hard on the poor because a large portion, up to 80 percent, of their incomes are spent on food, the Bank said.
In countries such as Belarus, Moldova, and Ukraine electricity prices could increase as governments adjust their energy tariffs to recover costs, putting further pressure on the incomes of the poor, the report said.
To lessen the hardships on the poor, the World Bank said governments need to strengthen and protect social programs, especially well-performing ones, despite tighter public budgets.
Barbone said governments should focus on spending their money wisely to protect the poor and should resist pressure to cut social programs that are needed more now than ever before.
