It is the most rapid decline in Indonesian poverty in seven years. There are five factors that explain this positive development:

  • Indonesian inflation has remained low. In the March-September 2017 period the consumer price index rose by 1.45 percent, which is low for Indonesian standards. In full-year 2017 Indonesia's inflation rate accelerated to 3.61 percent (y/y).
  • Over the March-September 2017 period, daily wages of agricultural laborers rose by an average of 1.50 percent, while that of construction workers rose 0.78 percent.
  • Real wages of agricultural laborers rose 1.05 percent over the March-September 2017 period, while that of construction workers rose 0.66 percent. This shows that the economic conditions are also improving in the rural areas. This development is also supported by improving infrastructure in the regions (financed through the village funds that are transferred by the central government).
  • Increases of several key commodity prices was kept under control, while others experienced deflation. Therefore, these inflationary pressures did not plague the poorer segments of Indonesian society too much in the aforementioned period. For example, in full-year 2017 the price of rice only rose 0.69 percent, the price of beef by 0.43 percent, while prices of sugar, cayenne pepper, and red chili pepper fell 9.74 percent, 57.69 percent, and 20.53 percent, respectively.
  • The government's rastra program (referring to subsidized rice for the country's poor people) is showing good results as the rice was distributed to 30 percent of targeted households in the May-August 2017 period.

Poverty remains highest (in relative terms) in Papua, West Papua and Maluku, all located in the (far) eastern region of Indonesia. Therefore, the government is advised to raise its poverty eradication efforts in these eastern regions of Indonesia. In the 2018 state budget these regions have indeed been given a bigger share of the 'transfer to the regions' and 'village funds' budgets. However, sending more money alone not necessarily improves the situation and therefore the central government should find ways to encourage better management of these funds in the aforementioned provinces.

The percentage of poor people living in the urban areas of Indonesia fell to 7.26 percent in September 2017 (down from 7.72 percent in March 2017), while the percentage of poor people living in the rural areas fell to 13.47 percent (from 13.93 percent in March), hence urban and rural poverty experienced a similar rate of decline in the March-September 2017 period.

Indonesian Poverty & Inequality Statistics:

  2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Relative Poverty
(% of population)
15.4 14.2 13.3 12.5 11.7 11.5 11.0 11.2 10.7 10.1
Absolute Poverty
(in millions)
35.0 32.5 31.0 30.0 28.7 28.6 27.7 28.5 27.8 26.6
Gini Coefficient/
Gini Ratio
0.35 0.37 0.38 0.41 0.41 0.41 0.41 0.41 0.40 0.39

Source: Statistics Indonesia (BPS)