Many expert clains that the ongoing transboundary haze crisis is significantly impacting Malaysia's economy, with estimated losses ranging from RM20 million to RM50 million daily due to economic disruptions, healthcare expenses, and diminished worker productivity. Reported that this damage could escalate to between RM600 million and RM1.5 billion monthly and affecting sectors like tourism, aviation, and agriculture the most. Moreover, the haze exacerbates public health issues, increasing medical costs and hidden productivity losses, emphasizing the necessity for collaborative preventive measures with neighboring countries. Experts urge regional cooperation to address the root causes of haze to mitigate recurring financial burdens. While a few domestic sectors may see temporary revenue spikes from the ongoing transboundary haze issue, these gains are vastly outweighed by macro-level productivity losses, supply chain delays and affect the health expenditures across the broader economy. According to BIMB Securities director of research Mohd Redza Abdul Rahman, a prolonged haze episode acts as an external supply shock that dampens aggregate economic activity through labour erosion, capital misallocation, and elevated cost structures. The impact of the haze on productivity and economic growth can be seen firstly in terms of labour supply and human capital erosion, as increased medical sick leave directly reduces total hours worked. Moreover, school closures triggered by high air pollutant index (API more than 150 school closed) levels could result in secondary labour losses, as working parents are forced to take time off or work at reduced capacity for childcare, causing productivity losses across unaffected industries. At the same time, presenteeism losses can arise as employees who continue working during severe haze experience cognitive fatigue and lower output efficiency, leading to an unseen drag on companies’ operations. The haze season is expected to extend into late October or early November, versus late September or early October under normal weather patterns. The high probability of a Super El Nino threatens to turn dispersed forest fires into larger and more persistent haze episodes. What makes matters worse is that this time around, volcanic eruptions in Indonesia, such as the recent explosive activity from Anak Krakatau and some secondary plumes from regional volcanoes, add a complex layer to the air quality crisis. While primary eruptive phases typically calm down after several days, residual gas degassing and localised ash resuspension can persist for weeks.
The negative effects of the haze is likely to be felt more acutely in sectors such as tourism, aviation, agriculture, construction and logistics. In Malaysia as for the tourism, aviation and hospitality industries, international cancellations are expected to surge as visibility drops and health advisories are issued. According to Redza, flight delays, rerouting, and groundings will directly lower airport landing fees, airline revenues, and hotel occupancy. Also, eco-tourism and outdoor attractions may face near-total operational halts. The agriculture and plantation sector in particularly for palm oil and agro-commodities it could also be impacted as particulate matter reduces photosynthetically active radiation hindering crop growth and delaying fruit ripening (See photo above). Field harvesting hours are also restricted to protect worker safety, while workers are frequently reassigned to local firefighting. This creates labour shortages and reduces yield efficiency. The construction and real estate sector could also face disruptions from the haze, as outdoor projects may be forced to slow down or halt when API readings reach high levels. Redza said this could result in project completion delays, along with penalties and idle labour costs. The poor visibility could disrupt transport and logistics by reducing road transit speeds and increasing accident risks. Gig-economy workers, including food and parcel delivery riders, could also face higher health risks, potentially leading to reduced working hours and higher absenteeism. On the other hand, some sectors could see some temporary benefits as households and businesses adjust to prolonged haze conditions. For the healthcare that the pharmaceuticals and medical devices industry where by for instance it could see stronger demand for demand respiratory medications, inhalers, eye drops, masks and diagnostic consultations. Ecommerce and digital services could also benefit as consumers spend more time indoors, boosting online retail, food delivery, streaming and digital entertainment. Many manufacturers and retailers of air purifiers, replacement Hepa filters, and HVAC systems could see elevated sales. Besides, higher household electricity consumption from greater use of air-conditioning and air filtration systems could support the utility sector. According to IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said the economic impact from the haze extends beyond healthcare costs and mortality, as weaker labour productivity can reduce overall household welfare and economic output. Businesses may need to spend more on air filtration, protective equipment, healthcare support and workplace adjustments. Certain industries, particularly those involving outdoor activities, construction, logistics, agriculture, tourism and recreational services, could experience more immediate disruptions. He stated that a prolonged haze season can affect the economy through a combination of lower productivity, higher business costs, reduced labour availability and weaker consumer activity.
In case of household spending and activity could weaken during prolonged haze episodes, as households may reduce outdoor recreation, travel, dining and other activities. Staying indoors reduces exposure to pollution, but this also represents forgone economic activity that affects businesses. To illustrate the potential impact on productivity state that for one microgramme-per-cubic-metre increase in the concentration of PM2.5 as a key measure of fine particles measuring 2.5 micrometres or smaller that could be associated with a 0.6% to 1.9% decline in productivity. It should not be directly interpreted as an estimate of the country’s gross domestic product loss. The actual impact on the country would depend on the geographical spread of the haze, the intensity and duration of exposure, the number of workers affected and the extent to which businesses can mitigate the disruption,” he said. Reported that in a note to clients the Hong Leong Investment Bank (HLIB) Research said the worst is yet to come for the current haze situation. The Malaysian Meteorological Department has projected a more than 90% probability of a “very strong” or “Super El Niño” between October and December 2026, potentially making the upcoming dry season one of the more challenging in recent years. In MET view, the risk could be underestimated if the dry spell persists into the fourth quarter of 2026 (4Q26), as prolonged dry conditions may not only intensify fires originating from Indonesia, but also increase the likelihood of naturally occurring fires across Malaysia. This creates a potentially broader and more persistent haze risk, with the northeast monsoon potentially arriving too late to provide the usual seasonal relief. The research house said the haze can reduce solar photovoltaic (PV) output by limiting solar irradiance, with a 17.8% decline in PV output recorded during the 2015 haze episode. The aviation faces more direct operational risks, as deteriorating visibility can trigger delays, cancellations, holding or diversions. Meanwhile tourism could suffer from weaker traveller sentiment, booking cancellations and closures of outdoor attractions. The healthcare presents the clearest potential offset, as higher respiratory cases could support incremental patient volumes at private hospitals, although the relatively low revenue intensity of haze-related cases limits the potential earnings upside. Hence, we see haze as a modest earnings event for the healthcare sector rather than a broad-based re-rating catalyst, with the key variable being whether the episode remains short-lived or extends into the 4Q26 dry season. On the flip side, the research house said AirAsia Group Bhd has direct exposure to haze-related flight disruptions, with deteriorating visibility potentially driving cancellations, delays and network disruptions. Beyond the immediate operational impact, a prolonged haze episode could weigh on tourist arrivals and regional travel demand and particularly across AirAsia’s Malaysia-Indonesia network. Thanks...
By,
M Anem,
Senior Agronomist Expert,
Bandar Melaka,
Melaka,
Malaysia.
(October 2026).








