How Do Poverty and Inequality Impact the Economic Growth in South Sumatra?

The province of South Sumatra is widely known as one of the most prosperous regions in Indonesia. In fiscal year 2022, the region’s gross domestic product (GDRP) was Rp 591.603,48 billion, with a per capita income of Rp 68,31 billion. Additionally, this economy grew by 5,23%, exceeding the national average, and contributed Rp 9,98 trillion in actual revenue for the government. Nevertheless, the level of poverty remains significant, at 11.9%. Numerous scholarly studies have been conducted over the past few decades to investigate the interconnections between economic growth, income disparity, and poverty alleviation. The prevailing findings of these studies have consistently demonstrated that there is a positive correlation between economic growth and poverty alleviation. However, the relationship between economic growth and income inequality remains uncertain. This study aims to investigate the interrelationships between economic growth, inequality, and poverty reduction in the province of South Sumatra. The methodologies employed encompass descriptive analysis and panel data analysis. The analysis utilises Gross Domestic Regional Product (GDRP) statistics at the regency level, as well as data from the National Socio-economic Survey and local government budgets spanning the period from 2015 to 2022. The findings indicate that economic growth has turned out to be the result of increasing poverty and income inequality all at once. Growth in the mining and agricultural sectors tends to increase poverty because it is capital-intensive and does not appear to absorb labour from people experiencing poverty. Additionally, increases in income inequality are positively correlated with increases in poverty. Keywords: economic growth, poverty alleviation, head count index, inequality, panel data analysis