BRIEF

Reducing extreme poverty in Indonesia

October 22, 2014


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The World Bank

TOPIC HIGHLIGHTS
  • Strong economic growth in Indonesia has helped to reduce poverty, with the poverty rate falling from 24% in 1999 to 11.4% in 2013. But the pace of poverty reduction is slowing.
  • Over 65 million people live just above the poverty line and are vulnerable to falling into poverty.
  • The Government of Indonesia has a holistic approach to poverty alleviation that spans social assistance, community empowerment, and sustainable livelihoods.

The state of poverty in Indonesia

Strong economic growth in Indonesia has helped to reduce poverty, but the pace of poverty reduction is slowing. Recovery from the Asian Financial Crisis of 1997-98 has seen steady economic growth, a growing shift of labor from agriculture to services, and solid job creation in cities. These trends have contributed to a halving of the poverty rate, from 24% in 1999 to 11.4% by early 2013. However, the rate of poverty reduction has been slowing. In 2012 and 2013, poverty declined by only 0.5 percentage points each year -- the smallest declines in the last decade.

Many people live just above the poverty line and are vulnerable to falling into poverty. Many Indonesians who have climbed out of poverty remain just above the line. In 2013, around 28 million Indonesians lived with less than IDR 293,000 (roughly $25) a month. An additional 68 million made do with not much more.   Small shocks can drive them into poverty, and indeed many families fall in and out of poverty. Based on 2010 data, over half of the poor each year were not poor the year before. A quarter of Indonesians suffer from poverty at least once in a three year period.

World Bank support on poverty reduction in Indonesia

The World Bank continues to work closely with the Government of Indonesia in its efforts to reduce poverty. Research on poverty and poverty alleviation spans a broad range of areas, such as poverty trends, social assistance, social insurance, community-based programs and generating more and better jobs. This research repository serves as a foundation of evidence for the policy recommendations and other support that the Bank provides to the Government of Indonesia. The Bank also provides technical support for the implementation of government programs. For example, the PNPM Support Facility provides analytical and implementation support for Indonesia’s National Community Empowerment Program.