PETALING JAYA: The worsening haze is expected to weigh on businesses across several sectors, particularly agriculture and tourism, although economists believe its impact on Malaysia’s overall economic growth will remain limited.
While prolonged haze conditions could impact productivity, reduce consumer activity and raise healthcare costs, economists said the losses are unlikely to significantly affect the country’s gross domestic product (GDP).
Sunway University economics professor Yeah Kim Leng said the economic impact of the haze would be felt mainly at the industry and business levels, with companies facing weaker demand, operational disruptions and higher costs.
He said the agriculture sector was particularly vulnerable as reduced sunlight could affect crop growth and yields, while poor air quality could disrupt working schedules and lower productivity.
“For example, it reduces the yield of palm oil, and also the productivity,” he told StarBiz.
“Vegetables and their growing cycle are affected by the haze because of the lack of sunlight,” he added.
Yeah pointed out that the tourism sector could also experience a slowdown as poor air quality discourages outdoor activities and reduces both domestic and international travel.
“When there are reduced outdoor activities, you see a drop in both local and foreign tourism.”
This would subsequently have a knock-on effect on aviation, transportation and other tourism-related businesses, according to Yeah.
Beyond these sectors, he said the haze could lead to higher healthcare costs, as more people seek treatment for illnesses such as asthma and other respiratory conditions.
An increase in sick leave could further affect workforce productivity, while potential school closures could disrupt education activities, he said.
Despite these disruptions, Yeah further elaborated that the overall impact on Malaysia’s economy would likely be relatively small, given its size.
He estimated that the haze could shave only a couple of basis points off GDP growth, even if the combined direct and indirect economic losses ran into billions of ringgit.
Nevertheless, Yeah cautioned that the impact on individual businesses could be more pronounced, particularly those exposed to outdoor activities or dependent on consumer traffic.
“Although the economy-wide impact is relatively small, the impact at the sectoral and business levels could be more pronounced.”
He said affected businesses could face pressure from both weaker demand and higher operating costs.
Juwai IQI global chief economist Shan Saeed shared a similar view, saying the haze was unlikely to derail Malaysia’s economic growth momentum.
He said the haze should be viewed as a temporary disruption affecting specific industries rather than a major threat to the broader economy.
“Does it have any impact on the GDP? No. Does it lower Malaysia’s per capita income? No,” he said.
“For me, it’s a micro variable. It is not a macro variable.”
Shan said the disruption was unlikely to materially affect the government’s fiscal position, budget deficit or debt-to-GDP ratio.
He added that the haze remained manageable compared with the pandemic, which had a much greater human and economic toll.
According to the Statistics Department’s advance estimates, Malaysia’s economy expanded by 5.3% in the third quarter of financial year 2026 (3Q26), following a 5.7% expansion in the first half of the year.
This brought GDP growth for the first nine months of 2026 to 5.5%, compared with 4.8% in the corresponding period last year.
The Statistics Department is scheduled to release the official 3Q26 GDP figures on Nov 18.
On measures to address the recurring haze problem, Yeah called for stronger regional cooperation, particularly with Indonesia, to prevent forest fires and improve firefighting efforts.
He said greater enforcement was needed against deliberate land clearing through open burning, which remained an attractive option for plantation operators because of its low cost.
Yeah also urged larger plantation companies to take greater responsibility for preventing and monitoring fires on their land and in surrounding areas.
“We need to take a more punitive action, especially for large plantation owners,” he said.
“They have to be more accountable, to ensure that they do not resort to using this method.”
He added that Malaysia and neighbouring countries should work towards a coordinated long-term strategy to address the recurring problem.
Similarly, Shan favoured diplomatic engagement over legal action, saying closer cooperation with Indonesia would be a more practical way to resolve the issue.
“If you want to make progress faster, you have to have an engagement strategy,” he said.
