Indonesia's Economy Grows, Poverty Falls, But Public Spending Power Lags

Indonesia's economy demonstrated robust growth of 5.29% in the second quarter of 2026, accompanied by a notable decrease in the poverty rate. However, despite these positive macroeconomic indicators, the purchasing power of the general public has yet to show a full recovery.

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The decline in poverty is good news amidst Indonesia's economic growth of 5.29 percent in Q2 2026. However, several indicators show this improvement has not fully reflected an increase in public welfare evenly.

Official statistics from the Central Statistics Agency (BPS) reveal that the number of people living in poverty dropped to 22.93 million in March 2026, representing 8.07% of the total population. This marks a reduction of approximately 430,000 individuals compared to September 2025, when the poverty rate stood at 8.25%.

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The decline in poverty occurred in almost all regions of Indonesia. The deepest decline occurred on the island of Java, which was 0.21 percent points.

BPS Deputy for Statistics, Edy Mahmud, noted that poverty reduction was observed across most regions, with the most significant decline occurring in Java, which saw a 0.21% point decrease. Nevertheless, Java still accounts for the largest concentration of the poor, with 12.02 million people, or 52.42% of the national poor population. Furthermore, the poverty rate in rural areas remains considerably higher at 10.67%, compared to 6.34% in urban areas.

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The increase in the poverty line indicates that the minimum needs of the community to meet basic needs continue to increase.

Adding complexity, the national poverty line increased by 4.33% to Rp 669,235 per capita per month in March 2026, indicating a rise in the minimum cost of basic necessities. In rural areas, both the Poverty Depth Index (P1) and Poverty Severity Index (P2) saw an increase, suggesting that a segment of the rural poor faces more severe economic pressures than six months prior. The government, however, points to social protection programs, with the Ministry of Social Affairs reporting that over 132,000 beneficiary families have graduated out of the social assistance system due to improved economic independence.

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The condition in rural areas has also not fully improved. The Poverty Depth Index (P1) and the Poverty Severity Index (P2) have actually increased in these areas.