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Publication(World Bank, Washington, DC, 2020-05) World BankIndonesia has sustained robust growth over a long period, and this has enabled millions of citizens to move out of poverty. Indonesia’s gross domestic product (GDP) has risen at an average 5 percent a year since 1990 and 5.3 percent a year after the Asian financial crisis at the end of the 1990s. This growth has been supported by favorable international commodity markets, a large, young population, and a solid macroeconomic policy framework. Although the growth has moderated in the last few years as commodity prices and global financing conditions that had buoyed growth previously have become less favorable, annual GDP growth has still averaged 5 percent since 2014. As a result, GDP per capita is calculated to have grown six fold between 1990 and 2018, while extreme poverty declined from 57 percent to slightly less than 6 percent. However, many Indonesians remain vulnerable, and most of those who have escaped poverty still lack the economic security and well-being of the middle class. Despite the progress in poverty reduction, around 30 percent of Indonesians still risk falling back into poverty or become poor following a financial or nonfinancial shock. In addition, although their number is growing, fewer than a quarter of Indonesians are today free from worry about monetary poverty and therefore belong to the middle or upper class. Joining the middle class is associated with people who have additional disposable income for discretionary expenditures, such as on health care, education, and housing, which directly affect their well-being. While rural areas have also benefited from this broad-based growth, an overwhelming majority of the poor and vulnerable are living in rural areas. Making continued progress in reducing poverty will require that the challenges to improving the living conditions of the poor in rural areas are addressed. Against this backdrop, the objective of this report is to update the knowledge about rural poverty in Indonesia. The report analyzes the trends in rural poverty and inequality, the profile of the rural poor, and drivers of observed poverty reduction. New analysis is combined with syntheses of recent work, especially the recent report on urbanization. The goal is to consolidate relevant material on rural poverty. The final section of the report offers some reflections on future research to deepen the understanding of the challenges and the opportunities involved in reducing rural poverty in Indonesia.
Publication(World Bank, Washington, DC, 2019-09) Atamanov, Aziz ; Castaneda Aguilar, R. Andres ; Diaz-Bonilla, Carolina ; Jolliffe, Dean ; Lakner, Christoph ; Mahler, Daniel Gerszon ; Montes, Jose ; Moreno Herrera, Laura Liliana ; Newhouse, David ; Nguyen, Minh C. ; Prydz, Espen Beer ; Sangraula, Prem ; Tandon, Sharad Alan ; Yang, JudyThe September 2019 global poverty update from the World Bank includes revised survey data which lead to minor changes in the most recent global poverty estimates. The update includes revisions to 18 surveys from four countries. As a result of the revised data, the estimate of the global 1.90 US Dollars headcount ratio for 2015 increases slightly from 9.94 percent to 9.98 percent, whereas the number of poor increases from 731.0 million to 734.5 million people.
Publication(World Bank, Washington, DC, 2019-09) World BankIndonesia has seen tremendous progress in poverty reduction over the past couple of decades and, as a result, has made a successful transition from low-income to middle-income country status. As millions have moved out of poverty and extreme poverty, we have also witnessed the rise of Indonesia’s middle class, which now accounts for 20 percent of the total population, or 52 million Indonesians. This group important for Indonesia’s upward trajectory, but it still too small for the ambitions of Indonesia. Expanding the middle class will boost economic growth, strengthen an influential constituency for better governance, and widen and deepen the tax base. An expansion of the middle class, if accompanied by continued growth in the incomes of the poor and vulnerable, will also help to decrease inequality and prevent polarization of the country. One of the key development questions that Indonesia faces is how to expand the middle class. What will be required to bring the 115 million people who are no longer in poverty and vulnerability into the middle class? The future of Indonesia lies partly in the fate of this aspiring middle class, 45 percent of the population, so that they can both share in and help to drive the country’s growing prosperity. Government policy can play an instrumental role in expanding the middle class. This can be done by increasing the level and quality of education, and the skills of the population, and making sure there are well-paid jobs waiting for those in the aspiring middle class. It also means ensuring access to social protection to help lift these aspirers into the middle class and keep them there once they arrive, as well as improving the quality of the public services upon which they currently depend. Resolve to expand the middle class will place greater stress on government budgets. The government will need increasingly rely on the middle class, whose income taxes will finance much of the investment that a growing Indonesia will need. This will require a new social contract with the current – and future – middle class so that they will embrace the policies that both benefit themselves while also helping to expand their ranks, rather than closing off opportunities for others, and creating political polarization—as has occurred in some countries in the region in recent years.
Improving Service Levels and Impact on the Poor: A Diagnostic of Water Supply, Sanitation, Hygiene, and Poverty in Indonesia(World Bank, Washington, DC, 2017-10) World Bank GroupThe objective of this report is to provide an empirical basis for more inclusive and equitable service delivery in the water and sanitation sector in Indonesia. Despite recent gains, there are close to 100 million people without improved sanitation and 33 million without improved drinking water. These figures hide the persistent divides between urban and rural populations and among different income levels in access to services, and they mask underlying gaps in quality faced by all households, regardless of income or geographic location. Unequal access to services at the beginning of life is a key driver of inequality, placing children at a unfair disadvantage from the outset. The report shows that children living in communities where open defecation is practiced and where the quality of drinking water is poor are more likely to be stunted and suffer from cognitive deficits later in life. Improving the ability of and opportunity for the poor and vulnerable to benefit from water and sanitation services can help to ensure that Indonesia not only achieves its service delivery targets, but that water supply and sanitation become key drivers of a reduction in inequality, enhanced health and well-being, and economic growth and prosperity.