Forest Fires Hit Canada's Economy

Her wine estate served Joanna Schlosser as a home during the days when the fire was at the gates of her town. But today, this resident of western Canada is concerned not only about the long-term damage to her establishment but the entire Economy of the country.

Canada is experiencing the most intense fire season in its history this year: almost 16 million hectares have burned and 200,000 people have been displaced, especially in the west and extreme north of the country.

Little by little, the bill and the economic impact are increasing for this country that is part of the group of richest nations, the G7.“We have to face a quite devastating season in terms of visits and sales in the vineyards”, explains Schlosser, who had to leave her house in a few minutes in the middle of the night.More than 200 homes were destroyed by flames in this wealthy and heavily touristed region of British Columbia.

This year, the profits of the tourism sector have been reduced considerably. Visitors are fleeing the fires and the smoke that has been suffocating the region for weeks.With Kelowna's airport and main road temporarily closed, tastings, weddings and other events have been cancelled.

Stephen Brown, an analyst at Capital Economics , explains in a note that, in principle, the forest fires have little impact on the Canadian economy.However, this year“they have spread so far that we are seeing a bigger hit than usual” and appear to be“responsible for much of the recent weak GDP”.

As the fire season is not yet over,“the numbers will probably remain bad for the next few months,” he adds.Canada saw its economy contract 0.2% in the second quarter and the start of the third quarter follows the same trend.

Factors contributing to the drop include“wildfires, which halted oil and gas production in May and limited consumer activity in June,” says James Orlando of TD Bank.Another affected sector is the timber industry, which employs more than 30,000 people.

In a June report, Oxford Economics warned that the wildfires could cut Canada's economic growth this year by between 0.3 and 0.6 percentage points.However, the balance sheet is“not as bad as it could have been,” says Tony Stillo of Oxford Economics.”Although forest fires are significant, they occur in remote areas, and their incidence on large populations, economic centers or transportation corridors is lower,” he points out.

In its new climate adaptation plan, Ottawa estimates the annual cost of fighting wildfires at about US$737 million.It particularly underlines that, according to the Canadian Climate Institute, climate change, which aggravates episodes of drought and therefore makes forest fires more likely and frequent, could halve the country's economic growth in the coming years.

By 2030, average annual disaster losses are projected to reach about US$11.4 billion.Insurance company losses have increased fivefold since 2009, to more than US$1.474 billion a year, according to the Canada Insurance Office, which represents several private insurance companies.

Jason Clark, who works for the organization, says he is concerned that Canadians no longer face a catastrophe every decade, but“several events in a single year”: fires, floods, heat waves, storms...“When countries regularly experience large losses, this has a significant impact on risk assessments and insurance premiums,” he adds.“We need to be better prepared.”

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