Could Poverty Rates Drop by a Single Digit Percentage Point?

Indonesia's economic growth of around 5 percent has proven insufficient to reduce poverty rates to a single digit (below 10 percent). In 2016, the Indonesian economy grew by 5.02 percent compared to the previous year. However, the poverty rate only decreased to 10.7 percent in September 2016, down from 11.13 percent in September 2015.

The 2017 State Budget (APBN) targeted Indonesia's economic growth at 5.1 percent. This is lower than the 2016 target of 5.2 percent. Meanwhile, the poverty rate was targeted to decrease to 10.5 percent from its September 2016 level.

Reducing the poverty rate to a single digit requires higher economic growth than currently achieved. However, limited budget allocations, coupled with sluggish tax revenue, constrain funds available for growth stimulus. The government continues to strive for growth by cutting spending on goods and services and reallocating funds to capital expenditure. Furthermore, the government is encouraging private sector and State-Owned Enterprises (SOEs) to finance infrastructure projects, which are expected to provide a stronger impetus for higher growth in 2018.