Indonesia Poverty Rate — The poor population is those whose consumption expenditure is below the purchasing power line. The purchasing power line is measured based on the price required to purchase the basic food needs equivalent to 2100 kilocalories per person per day, excluding non-food essentials. Therefore, the World Bank has specific standards to measure global poverty levels using a measurement tool called Purchasing Power Parity (PPP). PPP is a measure of the price of particular goods in different countries and is used to compare the absolute purchasing power of countries' currencies.
PPP is determined by comparing the prices of purchasing a bundle of goods and services in each country. This information is then used to convert each country's PPP into a standard monetary unit such as the US dollar. This conversion makes PPP comparisons more relevant.
The PPP 2011 reveals $1.9 as the extreme poverty line. According to this measurement, extreme poverty in Indonesia decreased from 19% in 2002 to 1.5% in 2022. Similarly, the lower-middle-income poverty line of $3.2 reduced Indonesia's lower-middle-income poverty rate from 61% in 2022 to 16% in 2022.
But in September 2022, the international poverty line was updated from $1.90 to $2.15 per person daily. This update is necessary to account for changes in prices worldwide. The increase in the poverty line reflects the higher costs of essential food, clothing, and shelter in low-income countries between 2011 and 2017 compared to the rest of the world. Essentially, the purchasing power of $2.15 in 2017 is equivalent to what $1.90 could buy in 2011.
With this new determination, 33 million lower-middle-class individuals in Asia have fallen into poverty. Indonesia and China are experiencing the highest decline in the lower-middle class. However, according to the World Bank, the actual value of the international poverty line remains virtually unchanged.
Based on the 2017 Purchasing Power Parity (PPP), 40% of Indonesians may be classified as poor. This change also resulted in 33 million Asians, previously categorized as lower-middle class, falling into poverty.
Does the declaration of a 1.5% reduction in extreme poverty levels in Indonesia by 2022 (referring to PPP 2011) merely represent an illusory achievement?
Sri Mulyani suggests that Indonesia should establish its national poverty line as the World Bank's (PPP) does not accurately reflect Indonesia's living conditions and low daily expenses. The Central Statistics Agency (BPS) measures the national poverty line based on fulfilling basic needs, considering poverty as the economic inability to meet essential food and non-food requirements rather than solely relying on expenditure measurements.
According to data from the Pathways Towards Economic Security: Indonesia Poverty Assessment, there has been a significant decline in the extreme and lower-middle poverty lines based on PPP (Purchasing Power Parity). However, when considering the NPL (National Poverty Line), the statistical trend appears relatively stable, with a minimal and insignificant decrease.
Therefore, the PPP standard established by the World Bank seems less relevant to Indonesia's economic conditions. The poverty level in Indonesia will not appear to decrease if it continues to be compared to the latest PPP standard (2017). Hence, using the NPL advocated by BPS (Badan Pusat Statistik) will feel more realistic for Indonesia as it is measured based on economically relevant conditions for the reality of Indonesian society.
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