The economy of the Riau Islands Province (Kepri) in the second quarter of 2023 decreased compared to the previous quarter, from 6.51% (YoY) to 5.04% (YoY). Despite the contraction, the cumulative economy of Kepri remains the highest in the Sumatra region at 5.77% (CTC), surpassing the average growth of Sumatra at 4.90% (YoY) or 4.84% (CTC), although it is lower than the national average of 5.17% (YoY). The optimism in economic growth aligns with the improvement in mobility and consumer spending as a result of the reopening of the tourism sector and increased investments. The increase in fiscal capacity at the regional level and the acceleration of spending by local and central governments are contributing factors. BI Kepri recorded that the combined inflation rate in Batam and Tanjung Pinang in August was 2.97% (YoY).
In addition to the decrease in inflation, the economy of Kepri also grew due to the acceleration of growth from government consumption, gross fixed capital formation (PMTB), and net exports. Government capital spending is aligned with massive infrastructure development, especially in infrastructure construction. The share of investment components, highly influenced by business efforts to increase production capacity and realise infrastructure spending. Furthermore, the performance of net exports improved due to a deeper reduction in total imports compared to the reduction in total exports. The realisation of regional government revenue in Kepri until the second quarter of 2023 amounted to 39.66%, while expenditure realisation reached 34.17% of the total budget.
Economic growth can be further boosted by utilising the potential of Kepri's tourism through incentive policies, such as a broader Visa on Arrival (VoA) fee waiver. Accelerating economic transformation requires comprehensive fiscal reform through the optimization of state revenues, improved efficiency and effectiveness of state spending, and the promotion of innovative, prudent, and sustainable financing.
