Estimating the Impact of Covid-19 on Poverty in Indonesia

Abstract

Covid-19 has infected and will continue to infect millions of people all over the world. The economic impact is predicted to be large and millions of people will be pushed into poverty. In this paper, we estimate the impact of Covid-19 on poverty in Indonesia. The economic impact is expected to be severe, reducing the economic growth rate projected for 2020 from about 5% to between 4.2% and –3.5%. We find that under the best-case scenario, the poverty rate will increase from 9.2% in September 2019 to 9.7% by the end of 2020, pushing 1.3 million more people into poverty. Under the worst-case scenario, the poverty rate will increase to 16.6%, close to the level seen in 2004 when the poverty rate was 16.7%. This means that 19.7 million more people will become poor, substantially reversing Indonesia’s progress in reducing poverty. The implication is that Indonesia will need to expand its social protection programs to assist the new poor as well as the existing poor.

Covid-19 telah menginfeksi dan akan terus menginfeksi jutaan orang di dunia. Dampak ekonomi diprediksi akan besar dan jutaan orang akan terjatuh ke dalam kemiskinan. Dalam tulisan ini, penulis mengestimasi dampak Covid-19 pada kemiskinan di Indonesia. Dampak ekonomi diperkirakan akan berat, mengurangi proyeksi pertumbuhan ekonomi 2020 dari 5% menjadi antara 4,2% dan -3.5%. Penulis menemukan bahwa dalam skenario terbaik sekalipun, tingkat kemiskinan akan naik dari 9,2% di September 2019 menjadi 9,7% pada akhir 2020, mendorong 1,3 juta tambahan orang ke dalam kemiskinan. Pada skenario terburuk, tingkat kemiskinan akan naik menjadi 16,6%, mendekati level pada 2004 ketika kemiskinan mencapai 16,7%. Artinya, akan ada pertambahan 19,7 juta orang miskin, dan dengan demikian secara substansial membalikkan kemajuan yang telah dicapai Indonesia dalam mengurangi angka kemiskinan. Dampaknya, Indonesia akan harus memperluas program perlindungan sosial guna membantu golongan miskin baru di samping orang miskin yang telah ada sebelumnya.

Keywords:

• Covid-19
• poverty
• shock
• economic growth
• household expenditure

JEL classifications:

• C53
• I19
• I32
• O49

Notes

1 BI’s projection is 4.2%–4.6%. Even the low end of the projection is optimistic compared with other projections.

2 BPS calculates the national poverty rate using separate poverty lines for urban and rural areas in each province.