Indonesia: Wildfires in Indonesia Pose Economic Risk, BI Says

  • Wildfires that have been raging in Indonesia may hurt economic growth if the problem persists, Bank Indonesia Deputy Governor Dody Budi Waluyo said.
  • “The impact of forest and land fires that cause smoke disruption, if prolonged, will certainly have an impact on economic and business activities,” Waluyo said via text message on 25 Sep 19, without quantifying the effect. “For this reason, we fully support the steps taken by the government to overcome this.”
  • The fires, which have caused a thick haze across Indonesia, Malaysia and Singapore for weeks, turning skies blood red in some parts, are damaging agriculture in the country. Along with a longer than usual dry season and drought in some parts of Indonesia, they have curbed palm oil and rice production.
  • Waluyo said the central bank is sticking to its forecast for growth to be in the lower half of the 5%-5.4% range in 2019, before picking up toward the midpoint of the 5.1%-5.5% range in 2020.
  • “Impacts that are more difficult to quantify are social and environmental impacts that are more long-term, including impacts on public health, impacts on educational activities that have been disrupted, and environmental damage caused,” he said.
  • While it’s still too early to measure the effect on growth, a World Bank report published after deadly wildfires in 2015 put the cost of that haze crisis at USD16bn. That price tag was at the time equivalent to 1.9% of GDP and twice the amount it took to rebuild the country after a tsunami devastated parts of Indonesia back in 2004.

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