SINGAPORE Oct 7 (Reuters) - Singapore's air pollution index reached unhealthy levels on Saturday as fires raged in Indonesia, leading the government to issue its first haze-related health warning this year.

The city-state's air pollution index hit 119 at 9 a.m. (0100 GMT), up from levels of 41 to 80 earlier in the week, Singapore's National Environment Agency said on its Web site (www.nea.gov.sg). A reading above 100 is rated unhealthy.

"Persons with existing heart or respiratory ailments should reduce physical exertion and outdoor activity," the agency said.

The Straits Times reported Malaysia's capital, Kuala Lumpur, had recorded a reading above 100 on that country's equivalent index and Sri Aman in Sarawak state on Borneo island had recorded a reading of 221.

The Singapore agency, which has begun updating the pollution index hourly each day as the haze worsens, encouraged people to avoid vigorous outdoor activity.

This year's worsening haze has rekindled memories of a choking cloud of smoke that covered large areas of Southeast Asia in 1997-98, sickening large numbers of people and costing local economies billions of dollars.

Timber and oil palm plantation companies lighting fires to clear land for planting have been blamed for the hundreds of fires that each year send a smoky haze across Malaysia and Singapore -- prompting protests from both governments.

Farmers, too, use slash-and-burn methods, a traditional practice magnified by a growing population, demand for land and the vast areas of forest that have been cleared in recent decades.