Poverty and Shared Prosperity: Challenges and Opportunities in the Post-Pandemic in Indonesia

English

Abstract

This article analyzes the impact of the COVID-19 pandemic on poverty and shared
prosperity in Indonesia, a diverse and populous country in Southeast Asia that has achieved
remarkable economic growth and poverty reduction since the late 1990s. The article draws
on the World Bank’s Poverty and Shared Prosperity 2022 report, which examines how fiscal
policy can help correct course and accelerate poverty reduction in the post-pandemic world,
by following four principles: progressive, efficient, sustainable, and coordinated. The article
also uses a vector autoregression (VAR) model to estimate the effect of poverty headcount
ratio (PHR) on four indicators: annual income (ANN), annual savings (ANS), greenhouse
gas emissions (GEE), and itself. The article finds that the pandemic has reversed the progress
made in reducing poverty and inequality in Indonesia, and that PHR has a positive and
significant impact on itself, but no significant impact on the other three indicators. The article
concludes that fiscal policy is a key instrument for mitigating the adverse effects of the
pandemic and restoring the path of poverty reduction and shared prosperity in Indonesia.
The article suggests that policy makers should adopt a comprehensive and context-specific
approach to design and implement fiscal policies that are progressive, efficient, sustainable,
and coordinated.