DT 09/20 - Too little but not too late. Nowcasting poverty and cash transfers' incidence in Uruguay during COVID-19's crisis.

The economic crisis triggered by COVID-19 is causing a world-wide massive economic downturn, and what is likely to be the deepest GDP contraction for Latin America since the beginning of the XXth century. We microsimulate the short-run effect of the crisis on the poverty rate for the Uruguayan case based on household survey data, publicly available information on both cash-transfers and the increase in unemployed formal wage-earners applying for unemployment benefits, as well as macro-economic estimates of the likely GDP contraction. By combining these data sources, we are able to estimate the effect of the crisis on formal, informal and self-employed workers, while providing full micro-macro consistency to our results. We find that during the first full month of the lock-down, the poverty rate reaches 11.7%, an increase of over 36%. Moreover, new cash transfers implemented by the government have a positive but very limited effect in mitigating this poverty spike. We estimate that most of this increase in poverty could be neutralized with cash-transfers worth less than 0.5% of Uruguay’s annual GDP.