The Far-Reaching Economic Impact of Wildfires

August 23, 2026 | 09:07 pm

TEMPO.CO, Jakarta - The chief economist at Trimegah Sekuritas Indonesia, Fakhrul Fulvian, believes that wildfire amidst the intensifying El Nino conditions could result in far broader economic impact beyond a mere scorched land or forest. 

"The multiplier effect of a disaster may be invisible in the earlier days. It might appear to be just a forest fire, but then health problems surge, work activities, school, and transportation are all disrupted which ultimately weakens the economic activity and people's livelihoods," Fakhrul says in a statement in Jakarta on Sunday.

The persisting haze from the fire may raise the cases of respiratory issues and public healthcare costs. As air quality drops even further, school activities and worker productivity will be disrupted. 

Disorders can also spread to flights and transportation, distribution of goods, local trade, and daily activities.

In areas dependent on agriculture, prolonged dry conditions can also impact water availability and food production. If stretched long enough, the impact can manifest in skyrocketing food prices and reduced community incomes.

According to Fakhrul, disaster prevention is part of ensuring economic activity continues to run smoothly. One of the unique characteristics of disaster budgets, he says, is that their success is often seen when nothing happens.

When a fire is controlled before it spreads, economic activity doesn't stop. When warning systems work well, communities can anticipate risks early.

When logistics and equipment are readily available, responses can be initiated without waiting for the situation to worsen.

According to him, these prevented losses rarely appear in economic statistics, but they have real value to society.

"We can often calculate the cost of a disaster after it occurs. What is much more difficult to calculate are the losses that didn't occur because prevention worked. Yet, the economic value can be enormous," says Fakhrul.

Therefore, according to Fakhrul, the principle that prevention is better than the remedy is not only a social or health principle, but also has strong economic logic.

The government can plan around the budget of preparation, but once a disaster strikes, the cost becomes that much harder to control, he says. 

In this regard, Fakhrul believes that the National Disaster Management Agency (BNPB)'s budget capacity must be strengthened if the increased disaster risk requires greater preparedness.

But he maintains that adequate prevention and response capacity is as important as the size of the budget.

Priority needs to be given to preparedness, risk monitoring, early warning, personnel, logistics, equipment maintenance, coordination with the regional disaster agencies, and the ability to respond quickly when hotspots or disasters begin to emerge.

Fakhrul also believes that there is a simple principle in risk management: the greater the probability of an event occurring and the greater the potential losses, the more important it is to be prepared to deal with it.

Therefore, he adds, when the risk of El Nino and wildfire grows, disaster management capacity should not be weakened.

"We certainly hope that this year's El Nino and forest fire risks can be overcome successfully. But hope must be accompanied by preparedness. Because the costs of prevention are almost always smaller than the economic, health, and social costs when a disaster has already escalated," Fakhrul concludes.

Read: As Wildfires Rage, Has Indonesia Calmed Neighbors over Haze Concerns?

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