Indonesian poverty at record low

Indonesia's poverty rate has fallen to a historic low this year while inequality, as measured by the Gini coefficient, has hit its lowest point in more than a decade. However, both figures remain below the government's target, according to latest official figures.

The poverty rate fell to 9.03 percent in March, beating the previous record of 9.22 percent in 2019. Statistics Indonesia director Nurma Midayanti told The Jakarta Post that it was the lowest in the country's history, according to methodology used since 1998.

The statistics bureau set 582,932 rupiahs ($35.56) per capita per month as the poverty threshold in its March survey.

David Sumual, chief economist of Bank Central Asia, the largest private bank in Indonesia, said the poverty rate falling to a historic low was good news, but he noted that the poverty metric was "tricky" because it was based on a relative definition.

Many Indonesians who are not considered poor are hovering slightly above the threshold and are therefore prone to slipping below the poverty line.

"So when there's a shift in prices or high inflation, or changes in income or purchasing power, it will affect the poverty rate; it will certainly go up," Sumual said.

The World Bank forecast that Indonesia's poverty rate could be about 16 percent in 2022 if measured by the global institution's standard poverty line of $3.2 per day. Meanwhile, the government figure was 9.57 percent in the same year, based on its own threshold.

Despite the relative improvement, the poverty rate still missed its mark by quite a margin. The 2024 state budget, for instance, sets this year's poverty rate target at between 6.5 and 7.5 percent.

Sumual said that if all other factors were held constant, the target range set by the government would have been "achievable" but the pandemic had pushed the trajectory off course.

Like poverty, inequality, as measured by the Gini coefficient, fell to 0.379 points in March, compared to the last record low of 0.378 in 2010, according to the statistics agency, which noted that inequality in urban areas was higher than in rural areas.

A higher Gini coefficient reflects a greater level of economic inequality. This year's state budget set the target for the index at between 0.374 and 0.377.

Sumual of Bank Central Asia said disparities between regions and demographics were important as further examination could reveal worse inequality.

"That's where the fiscal functions of distribution and reallocation come in," he said. "They're an important factor to make our growth more inclusive."

The Jakarta Post