Poverty Rate of Indonesia Expected to Rise in 2013 due to Higher Inflation
Indonesia's poverty rate is expected to jump to between 11.13 and 11.37 percent of the total Indonesian population in 2013 due to inflationary pressures. Inflation may reach 9.2 percent at the year end. The new poverty forecast is significantly higher than the government's original target of 9.5 to 10.5 percent as set in the country's State Budget. The revised forecast was presented by Indonesia's Ministry of National Development Planning (Bappenas). Poverty basket inflation is expected to rise accordingly.
The new poverty forecast already takes into account the effectiveness of various poverty programs which are bundled under the banner Acceleration and Expansion of Social Protection (P4S). The programs include subsidized rice for the poor (Raskin), a household-targeted social assistance program (Program Keluarga Harapan, abbreviated PKH), as well as scholarships for the poor (Beasiswa Miskin, BSM).
According to data from Statistics Indonesia (Badan Pusat Statistik), Indonesia's poverty rate stood at 11.37 percent in March 2013, equivalent to 28.07 million Indonesians. Statistics Indonesia releases reports about Indonesia's poverty rate twice per year.
Minister of National Development Planning, Armida Alisjahbana, stated that it is important to take efforts to limit inflation this year. "If we can control inflation below the 8.6 percent mark then poverty basket inflation will rise by about 9.6 to 10.1 percent and the total poverty rate will be between 10.82 and 11.12 percent." If the inflation rate - according to current projections - will indeed be 9.2 percent at the year-end then the relative poverty number will be at a maximum of 11.37 percent.
The government's initial poverty target for 2013 (9.5 to 10.5 percent) was calculated using an inflation rate of 7.2 percent. However, calender year inflation in 2013 has already reached 7.94 percent (January to August), while inflation accelerated to 8.79 percent (year-on-year) in August 2013. The most important contributor to inflation in 2013 has been the government's decision to reduce subsidies allocated to fuels. In late-June 2013, subsidized fuel prices were raised sharply. This resulted in higher logistics costs and thus food prices rose accordingly.
The outlook for poverty in 2014 has also been revised. Previously, Indonesia's relative poverty rate in 2014 was expected to ease to between 9 and 10 percent. However, due to the inflationary pressures in 2013, the upper band of relative poverty in 2014 has been raised to 11.3 percent. This outlook is much higher than targeted in the government's National Medium Term Development Plan (RPJMN, 2010-2014) of 8 to 10 percent.
Projections Indonesia's Poverty Rate:
| Year | GDP Growth | Inflation | Poverty Basket Inflation | Poverty Rate |
| 2013a | 5.9% | 8.6% | 9.6% - 10.1% | 10.82% - 11.12% |
| 2013b | 5.9% | 9.2% | 10.2% - 10.7% | 11.13% - 11.37% |
| 2014 | 6.0% | 5.5% | 6.5% - 7.0% | 11.06% - 11.33% |
Source: various sources
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