Poverty and inequality fall, government continues to keep inflation stable

JAKARTA In the face of global economic stagnation, various government policy strategies have been successful in increasing the resilience of the national economy.

In March 2024, the poverty rate continued to decline and stood at 9.03 percent, compared to 9.36 percent in March 2023.

In addition, the number of poor people in March 2024 decreased by 0.68 million compared to March 2023, bringing the number of poor people to 25.22 million.

The poverty rate is at its lowest in a decade.

Spatially, there has been an improvement, with the poverty rate falling in both urban and rural areas. The poverty rate in urban areas fell to 7.09 percent from 7.29 percent in March 2023.

Meanwhile, the percentage of rural poor decreased to 11.79% from 12.22% in March 2023.

Poverty reduction occurred across Indonesia, with the largest declines recorded in Bali and Nusra.

Meanwhile, Indonesia’s level of expenditure inequality (Rasio Gini) has also decreased and stood at 0.379 in March 2024, lower than before the pandemic, compared to 0.388 in March 2023.

This level is the lowest in a decade.

Inequality has reduced in both urban and rural areas.

The head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, said the decline in poverty in March 2024 was supported by solid domestic economic activity and various government social assistance programs, especially in response to the increase in food inflation in early 2024.

Febrio says reducing poverty offers hope in the face of a stagnant global economy.

“The government will continue to strive to maintain inflation stability to encourage people to increase their purchasing power, which can accelerate poverty reduction and improve the well-being of society,” Febrio said in a statement on Tuesday, July 2.

Accordingly, inflation in June 2024 stood at 2.51% (y/y), a significant decline compared to May 2024, when it stood at 2.84%, supported by controlled food prices and stable core inflation.

Month-on-month deflation stood at 0.08 percent, with prices of some food items continuing to fall.

Febrio said volatile food price inflation is on a downward trend.

Prices for various food products, such as shallots, tomatoes, broiler meat and eggs, fresh fish and some types of vegetables, continue to fall.

“This trend is consistent with an increase in inventories, supported by domestic supply and adequate distribution,” he said.

Febrio said rice prices continued to show a positive trend, supported by the Food Supply and Price Stabilization Programs (SPHP) and ample food reserves.

This resulted in volatile food price inflation continuing to slow in June, to 5.96% (y/y) from 8.14% (y/y) in May 2024.

Febrio said that core inflation and administrative prices support the control of overall inflation within the target range. Therefore, core inflation recorded only a slight decline of 1.90 percent (YoY) from 1.93 percent (YoY) in May 2024.

He said the state of core inflation still indicates strong purchasing power among the public, although caution is still needed.

Meanwhile, administrative price inflation increased slightly to 1.68% (y/y) from 1.52% (y/y) in May 2024, driven by seasonal factors, namely rising air transport rates in the middle of the school holiday season and the dynamics of air travel prices.

“Controlled inflation is also inextricably linked to close coordination of monetary and fiscal policies through the central inflation control team (TPIP) and the regional inflation control team (TPID),” he said.

He added that although inflation has been on a downward trend in recent months, the government continues to prepare by strengthening policies that aim to proactively maintain domestic production in the face of climate change risks and prepare for natural disasters.

Febrio added that the government will continue to increase synergy and coordination with relevant ministries and institutions, both at the central and regional levels, to create the right policy mix in response to the situation.

Manufacturing activity in Indonesia has also been on an upward trend for 34 consecutive months (June 2024).

The Indonesian Purchasing Managers’ Index (PMI) in the manufacturing sector currently stands at 50.7, down from 52.1 in May 2024.

“Production efficiency depends on the expansionary level of production and demand,” he explained.

Several of Indonesia’s trading partners also saw expansion in manufacturing activity, including China and the United States, at 51.8 and 51.7, respectively.

Producing countries in the ASEAN region such as Vietnam and Thailand are also showing expansionary trends, with scores of 54.7 and 51.7 respectively.

On the other hand, manufacturing activity in the European region is still in recession at 45.6. Countries in the European region such as Germany and France have contracted to levels of 43.4 and 45.3 respectively.

“Amid the global economic stagnation and financial market turmoil, PMI Indonesia is still in an expansionary trend and we hope that this trend will continue in the coming months with better quality. The government is seeking various forms of policy support to boost growth and maintain national economic stability in the future,” Febrio concluded.

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