US wildfires: A looming economic disaster
The Los Angeles wildfires damage is already set to cost $50 billion. Experts have said that there will be an economic impact, but at the moment, it is difficult to predict the full impact.
It was previously reported on IOL that raging wildfires in Los Angeles killed at least two people, destroyed hundreds of buildings, and stretched firefighting resources and water supplies since they began on Tuesday, with fierce winds hindering firefighting operations and fueling the fires.
AccuWeather, which estimates the loss between $52bn and $57bn, added that if the fire spread to densely populated neighbourhoods, the current estimates for loss would have to be revised upward.
"Should a large number of additional structures be burned in the coming days, it may become the worst wildfire in modern California history based on the number of structures burned and economic loss," AccuWeather Chief Meteorologist Jonathan Porter said.
AccuWeather's estimates for total damage and economic loss from the 2023 Maui wildfires were between $13bn and $16bn.
International relations expert Dr Noluthando Phungula from the University of KwaZulu-Natal said that the fires will definitely affect the US, specifically LA, on various fronts.
“First, it is the environmental impact, which translates and affects numerous ecosystems. This could continue to taint the state in the longer term in relation to air and water quality, soil damage, agriculture, etc.”
Phungula added that the second is the economic impact; fires cause destruction to property, businesses, and state facilities.
“This can cause chaos with insurance loss of jobs, which translates into the socio-economic sphere. Finally, there is the social aspect: the fires may leave many displaced, homeless, and in need of medical care and basic services, including food and water, putting extra pressure on public services, which would also be affected.”
Phungula said natural disasters often have economic implications.
“This is due to a number of reasons, including supply chain disruptions. Moreover, it may inflate costs and cause stock market fluctuations. Climate change is real, and if the fires persist, global investors may pull out, impacting the currency.”
Phungula said that similar to the Russia-Ukraine conflict, the wildfires in the US have the potential to affect other international economies.
“As we witnessed in the Russia-Ukraine war, various economies, including our own, were affected. If not contained, the fires may have a ripple effect, negatively impacting other international economies.”
Economist Dawie Roodt said he doesn’t feel the wildfires in LA will impact the exchange rate and the US dollar.
“It will have an impact with economic damage that will be experienced. But I don’t think it will have a major international impact on other economies. What it might do is create a call for more policies on climate change, and the other impact is that it could cause insurance prices to rise in America, but other than that, I don’t expect any impact on the US dollar or inflation.”
Unisa Professor Emeritus of International Law Andre Thomashausen said California has a GDP of $3.9 trillion per year, comprising 14% of the national USA GDP ($27.7 trillion).
“California's economy ranks fifth internationally, just behind the US, China, Germany, and Japan. By comparison, Russia ranks only 11th in the world. So a major economic calamity in California has an impact on the US national economy. However, while tragic, the fires are not expected to have lasting effects.”
Business Report