The devastating and deadly wildfires in Maui are expected to have an “astronomical” economic on the island and cause a severe local recession, Moody’s Analytics reported Monday.
The economic toll could run between $3 billion and $7.5 billion, according to initial estimates released Monday..
“The price tag is astronomical in the context of Maui’s size, as annual output is about $10 billion,” Adam Kamins and Katie Nied, Moody’s Analytics economists, wrote in the research report.
While those estimates are smaller than the effects of past major hurricanes, they’re higher than typical for wildfires, given the scale of the disaster and that it hit a fairly populated area with more “ferocity” than many events in California and other states, economists wrote.
The lion’s share of the economic impact for Maui is driven by property damage, with about $1 billion being attributed to lost output. Initial estimates suggest that more than 2,000 buildings were either destroyed or damaged, Kamins and Nied noted.
“With the median single-family house price in Maui just above $1 million, the effect on the housing stock alone pulls the estimate into the billions,” they wrote. “Combine this with the loss of a couple of hotels and numerous retail shops, most of which are more highly valued than the typical home on the island, and the number climbs considerably.”
They noted vehicle losses and infrastructure damage accounted for most of the rest of the total. The economic impact could have gone much higher had the fire spread to areas outside of Lahaina, where most of the major resorts are located, they added.
In the medium-term, however, the damage from the fires is expected to drive up house prices in what is already the nation’s second-least affordable metro area, according to the report.
In the near-term, the heavily relied-upon tourism income will be severely affected, they noted, adding that the approximately $20 million in daily visitors’ spending will be at risk for at least the next few weeks — if not longer. Job losses will be significant; local and state coffers will take hits from the lost revenue; and a “brief but severe local recession” is anticipated, they added.
The risks extend beyond the island of Maui.
“Many visitors to Hawaii are known to travel to more than one island, which means that the cancellation of entire itineraries will have ripple effects beyond Maui,” they wrote. “Some would-be travelers could also paint all of the Hawaiian Islands with the same broad brush and shy away from visiting, especially after volcanic eruptions on the Big Island in recent years.”