GINI Ratio Indonesia Declines: Economic Inequality Narrows
According to the latest data from Indonesia's Statistics Agency (BPS), wealth disparity has narrowed slightly in Indonesia, reflected by a declining Gini ratio from 0.408 in March 2015 to 0.397 in March 2016 (zero represents perfect equality, while 1 represents perfect inequality). This development is attributed to several matters, including rising earnings among Indonesia's middle-income segment. BPS noted that this increase comes on the back of government-led labor-intensive infrastructure development projects.
Suryamin, Head of BPS, stated that the daily income for Indonesia's agricultural workers rose by 2.3 percent (y/y) to IDR 47,559 (approx. USD $3.6) and by 3 percent (y/y) to IDR 81,481 (approx. USD $6.2) for construction workers in March 2016. Suryamin explained that this growth was supported by the 12 economic policy packages as well as heavy public investment in infrastructure development. Indonesian President Joko Widodo - in line with the pledge made during his presidential campaign - has been focusing on infrastructure development in order to cause a multiplier effect within the economy and thus boost overall economic growth.
Although infrastructure development in Indonesia remains plagued by several issues - including the difficulty of land acquisition and a hesitant private sector - several big projects are being constructed, supported by the government's generous infrastructure budget.
However, the decrease in income inequality in Indonesia is also influenced by a decline in earnings at Indonesia's high-income segment. This decline is primarily caused by low commodity prices, causing the nation's elite to earn less. Although having rebounded recently, Indonesia's key commodities - crude palm oil and coal - have been plagued by sliding prices over the past couple of years.
Other factors that contributed positively to narrowing income inequality in Indonesia over the past year were the government's social assistance program and higher civil servants' salaries.
Read more: Poverty in Indonesia: 10.86% of Indonesians is Poor (March 2016)
BPS applies the World Bank's spending distribution formula to determine the nation's disparity, with particular attention paid to the low-income segment. The bottom 40 percent of the Indonesian population accounted for 17.02 percent of total spending in March 2016, a slight decrease from 17.10 during the same period one year earlier.
Meanwhile, the top 20 percent of the population accounted for 46.89 percent of spending in March 2016, down from 48.25 one year earlier.
Lastly, the middle 40 percent of the population accounted for 36.09 percent of total spending in March 2016, up from 34.65 percent in the same period last year.
Indonesian Poverty & Inequality Statistics:
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| Relative Poverty (% of population) |
16.6 | 15.4 | 14.2 | 13.3 | 12.5 | 11.7 | 11.5 | 11.0 | 11.2 | 10.9¹ |
| Absolute Poverty (in millions) |
37 | 35 | 33 | 31 | 30 | 29 | 29 | 28 | 29 | 28¹ |
| Gini Coefficient/ Gini Ratio |
0.35 | 0.35 | 0.37 | 0.38 | 0.41 | 0.41 | 0.41 | 0.41 | 0.40 | 0.39¹ |
¹ In March 2016
Source: Statistics Indonesia (BPS)