The Impact of COVID-19 Outbreak on Poverty: An Estimation for Indonesia

Asep Suryahadi, Ridho Al Izzati , Daniel Suryadarma
Poverty & Inequality
Indonesia
Working Paper, April, 2020, Draft

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ABSTRACT

The Coronavirus Disease 2019 (COVID-19) is expected to infect millions of people all over the world. The economic impact is expected to be large and can lead to a global recession. Millions of people will be pushed into poverty. In this paper, we estimate the impact of COVID-19 on poverty in Indonesia. One projection puts 1.2 million people in the country would eventually be infected. The economic impact is also expected to be severe. Compared to the baseline projection of 5 percent economic growth in 2020, various studies estimate that COVID-19 would reduce Indonesia’s economic growth to between 1 and 4 percent. We find that under the mildest COVID-19 impact on economic growth, the poverty rate will increase from 9.2 percent in September 2019 to 9.7 percent by the end of 2020. This implies that 1.3 million more people will be pushed into poverty. Under the most severe projection, the poverty rate will increase to 12.4 percent, implying 8.5 million more people will become poor. The latter means that Indonesia’s progress in reducing poverty over the last decade would be wiped out. The implication of this is that Indonesia needs to expand its social protection programs to assist the new poor in addition to the existing poor.

Keywords: COVID-19, poverty, shock, economic growth, household expenditure


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