World Bank says Indonesia forest fires cost $7.1 billion in economic losses

The total damage and economic loss from forest fires in Indonesia this year amounted to at least US$5.2 billion (S$7.07 billion), equal to 0.5 per cent of gross domestic product, the World Bank said in a report on Wednesday (Dec 11).

The estimate was based on its assessment in eight affected provinces from June to October, though analysts at the multinational bank said fires had continued to rage through to November.

"The forest and land fires, as well as the resulting haze, led to significant negative economic impacts, estimated at US$157 million in direct damage to assets and US$5 billion in losses from affected economic activities," the World Bank wrote in the report.

Over 900,000 people reported respiratory illnesses, 12 national airports halted operations, and hundreds of schools in Indonesia, Malaysia and Singapore had to temporarily close due to the fires.

Drifting smoke at the height of the dry season in September triggered a diplomatic spat between Kuala Lumpur and Jakarta.

More than 942,000ha of forests and lands were burned this year, the biggest since devastating fires in 2015 when Indonesia saw 2.6 million hectares burned, according to official figures. Officials said the spike was due to El Nino weather patterns lengthening the dry season.

The World Bank also estimated a 0.09 and 0.05 percentage points reduction in Indonesia's economic growth in 2019 and 2020, respectively, due to the fires. Its growth forecast for Indonesia is 5 per cent for 2019 and 5.1 per cent for 2020.

The blazes were "manmade and have become a chronic problem annually since 1997" because fire is considered the cheapest method to prepare the land for cultivation, the bank said.

Because about 44 per cent of the areas burned in 2019 was in peatlands, carbon emissions from Indonesia's fires were estimated to be almost double the emissions from the fires in the Brazilian Amazon this year.

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The European Centre for Medium-Range Weather Forecast estimated a total of 720 megatonnes of CO2 emissions came from Indonesian forest fires in January to November this year.

Longer-term effects of repeated fires were not included in this estimate, the World Bank said.

Repeated haze exposure would reduce health and education quality and damage the global image of palm oil - an important commodity for Indonesia.