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International News

AIDS Could Cause Economies in Some Developing Countries To Collapse in Two Generations, World Bank Study Says

July 24, 2003

Previous studies have "seriously underestimated" the economic impact of the AIDS epidemic, which could cause economies in the hardest-hit nations to collapse in two generations, according to a World Bank study released yesterday, the Boston Globe reports (Donnelly, Boston Globe, 7/24). The report, titled "The Long-Run Economic Costs of AIDS: Theory and an Application to South Africa," found that while many economists had predicted that the epidemic would result in a 0.3% to 1.5% drop in African countries' gross domestic products each year, such estimates were flawed in the long term, failing to take into account the impact of education and parenting on the economy, according to Agence France-Presse (Agence France-Presse, 7/23). In contrast, the report says that the economic costs will be much higher. AIDS weakens the economies of African countries in three ways, according to the report. First, the disease mainly affects and kills young adults, removing their salaries and wiping out human capital -- the person's accumulated job and life skills. Second, the deaths of young people weaken or destroy families, ruining the mechanism by which a person passes on human capital to succeeding generations and draining the family resources needed to send children to school. Finally, the chance that the children themselves will eventually contract the disease in adulthood makes personal investment in education seem less important (World Bank release, 7/24). Therefore, while early damage may appear slight, these factors acting in combination could in the long run result in economic collapse (Agence France-Presse, 7/23).

South Africa
The report draws broader conclusions about other sub-Saharan African countries through its case study of South Africa. In the absence of the AIDS epidemic, South Africa may have experienced "modest but accelerating growth of per capita income," the report says (Reuters, 7/23). With an estimated 25% of South Africans ages 15 to 49 currently HIV-positive, the report estimates that by 2050 the per capita income per family will be half the amount it was in 1990, dropping to $12,901, according to the Globe (Boston Globe, 7/24). This suggests that South Africa's economy could face collapse within several generations "unless it combats its AIDS epidemic more urgently," according to a World Bank release (World Bank release, 7/24). In about 90 years, South Africa's per capita GDP could suffer a 50% decline, according to Shanta Devarajan, a report co-author and World Bank economist (Agence France-Presse, 7/23). Devarajan has presented the report to technicians in several government departments in the country (Reuters, 7/24).

Reaction
South Africa, which has become a "symbol for inaction on HIV/AIDS," must "bolster spending on public education" and President Thabo Mbeki, who "continues to be evasive about" the disease, must "throw his weight fully behind efforts to educate his citizens and change their behavior, efforts which have paid dividends in countries like Uganda," according to a Financial Times editorial (Financial Times, 7/24). "This report confirms how important it is for policy makers to act swiftly and effectively to prevent the spread of HIV/AIDS and to treat those with the disease," Clive Bell, a study co-author and a World Bank research fellow, said, adding, "Keeping infected people alive and well ... so they can continue to live productive lives and take care of the next generation, is not only the compassionate thing to do, but it is also vital for a country's long-term economic future" (Reuters, 7/23). Prabhat Jha, director of the Centre for Global Health Research at the University of the Toronto, said that the report "strikes me as missing the point," because regardless of the economic impact of the disease, "[w]e need to act because it is killing millions of people" (Boston Globe, 7/24).

Back to other news for July 24, 2003

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Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily HIV/AIDS Report, search the archives, or sign up for email delivery at www.kaisernetwork.org/dailyreports/hiv. The Kaiser Daily HIV/AIDS Report is published for kaisernetwork.org, a free service of the Kaiser Family Foundation, by The Advisory Board Company. © 2003 by The Advisory Board Company and Kaiser Family Foundation. All rights reserved.



  
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This article was provided by Henry J. Kaiser Family Foundation. It is a part of the publication Kaiser Daily HIV/AIDS Report. Visit the Kaiser Family Foundation's website to find out more about their activities, publications and services.
 
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