Big Impact of Mount Agung Eruption on the Economy of Bali
Indonesian authorities decided to keep Bali's Ngurah Rai International Airport closed until (at least) Wednesday morning (29/11) as volcanic ashes from Mount Agung jeopardize the safety of air traffic. Since Saturday Mount Agung has been erupting again, leading to the implementation of the highest alert code in the area. Meanwhile, Lombok International Airport, located on neighboring island Lombok, was reopened on Tuesday (28/11).
Bali's international airport will now be closed for (at least) two full consecutive days (starting from Monday morning). For the tourism industry of Indonesia this is a concern because Bali accounts for slightly over half of total foreign tourist arrivals in Southeast Asia's largest economy (tourism being one of the country's key foreign exchange earners).
In the January-August 2017 period Bali welcomed a total of 4.55 million foreign tourists, equivalent to 51 percent of total foreign visitor arrivals in Indonesia during the same period. However, the eruption of Mount Agung, one of the country's many active volcanoes, has already resulted in the delay of 455 flights (domestic and international flights combined).
And, problematically for Bali, the longer I Gusti Ngurah Rai International Airport will have to be closed, the bigger impact it will have on economic growth on Bali. The temporary closure of the airport and Mount Agung eruption may make many (domestic and international) tourists decide to avoid Bali, hence resulting in missed income. Bali's economic growth could therefore only touch 3.8 - 4.2 percent year-on-year (y/y) in the last quarter of 2017, which would be down significantly compared with a growth realization of 6.22 percent (y/y) in the preceding quarter. It is estimated that 60 percent of Bali's economy is dependent on tourism.
Meanwhile, there are 12,000 tourists "trapped" on Bali. Some of these tourists have been able to travel to Surabaya's Juanda Airport (in East Java) by land and water but most tourists remain stranded in Bali. Therefore Bali Governor Made Mangku Pastika requested local hotel operators to offer attractive discounts for the additional nights. Meanwhile, those foreign tourists who could not exit Indonesia due to the volcanic eruption and therefore overstayed their visa can apply for an extension of the visa.
A total of 22 local villages that are positioned within the danger zone need to be evacuated. It is estimated that around 100,000 people live in these 22 villages. However, so far only 40,000 people have in fact left their homes in the danger zone. Others are reluctant to leave as they feel safe and do not want to leave behind their livelihoods.
Indonesia's Key Arrival Gates:
| Port | Location |
Share of Total |
| Ngurah Rai | Bali | 51% |
| Soekarno-Hatta | Jakarta | 22% |
| Batam | Batam | 13% |
Foreign Visitor Arrivals in Bali:
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 |
2017 |
|
| Foreign Tourist Arrivals (in million) |
2.82 | 2.94 | 3.27 | 3.76 | 4.00 | 4.92 | 4.55¹ |
¹ January-September period only
Source: Statistics Indonesia (BPS)