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The Economic Value Of Indonesia Requires The Adoption Of The World Bank's Methodology For Calculating Poverty Levels

Wijayanto Samirin, an economist from Paramadina University, stated that Indonesia needs to adopt the World Bank's approach to measuring poverty levels.

When contacted in Jakarta on Tuesday, Wijayanto acknowledged that the World Bank's standards are too high for Indonesia, considering that these standards are designed for upper-middle-income countries with a gross domestic product (GDP) per capita ranging from 4,500 to 14,000 US dollars.

In contrast, Indonesia's GDP per capita is 4,900 US dollars. Although it falls within the upper-middle-income category, Indonesia is at the lower threshold of this group’s standards.

At the same time, Indonesia's Poverty Line (GK) is deemed too low, necessitating adjustments in line with the World Bank's approach.

"One potential solution is to gradually increase it towards the World Bank's standard as our GDP per capita approaches 9,500 US dollars, nearing the median of upper-middle-income countries, for instance," Wijayanto remarked.

Furthermore, he added that the lack of accurate data on poverty levels affects the effectiveness of government programs.

The low GK standard has led the government to concentrate on social assistance programs (bansos). However, it is believed that the government should implement programs that are structural and substantive.

To address this, Wijayanto recommends that the government focus on initiatives that generate new economic activities, enhance productivity, and ensure sustainability.

For instance, the government could increase the budget for the Ministry of Public Works (PU) for labor-intensive projects, such as rural roads and irrigation.

Additionally, it could expand interest rate discounts for housing projects aimed at the public through the Housing Financing Liquidity Facility (FLPP) and rationally relax cost-saving measures for meetings and business trips.

As a note, the World Bank, in its report titled "June 2025 Update to the Poverty and Inequality Platform," has updated its methodology for calculating poverty levels by utilizing the purchasing power parity (PPP) 2021 published by the International Comparison Program (ICP) in May 2024. Previously, the World Bank had used the PPP 2017 in its April 2025 report.

The implementation of PPP 2021 has revised the poverty line across three categories. For the international poverty line, which serves as the standard for extreme poverty, the value has been adjusted from 2.15 USD to 3 USD per capita per day.

The poverty line for lower-middle-income countries has changed from 3.65 USD to 4.20 USD per capita per day.

In contrast, upper-middle-income countries have seen an increase from 6.85 USD to 8.30 USD per capita per day.

With a poverty line set at 6.85 USD per capita per day (using 2017 PPP or prior revisions), approximately 60.3 percent of Indonesia's population in 2024 is considered to be living below the upper-middle-income poverty standard.

However, when applying the 2021 PPP calculations with the upper-middle-income poverty line of 8.30 USD, the percentage of the poor population in Indonesia rises to 68.25 percent.

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Tag: GDP Gross Domestic Product Wijayanto Samirin