UNAIDS/World Bank Press Release
AIDS Hindering Economic Growth, Worsening Poverty in Hard-hit Countries
July 11, 2000
Durban, South Africa -- HIV/AIDS is already starting to have immense impact on the economies of hard-hit countries, hurting not only individuals, families and firms, but also significantly slowing economic growth and worsening poverty, according to new research presented here at a meeting of economists at the XIII International Conference on AIDS here.
There is growing evidence that in the hardest hit countries of Southern Africa, national wealth will be reduced by 15-20 percent over the next ten years as a result of HIV/AIDS.
Lower economic growth and increased poverty threaten to form a vicious cycle, in which HIV/AIDS drives many families into deepening poverty, and at the same time poverty accelerates the spread of HIV.
"Breaking this cycle will require not only greatly increased investments in more effective HIV prevention and care, but also more effective measures to combat poverty," said Robert Hecht, UNAIDS Associate Director for Policy, Strategy and Research.
The large impact of AIDS on economic growth, and the close link between poverty and AIDS, were among the findings emerging from a two-day symposium of the International AIDS Economics Network (IAEN), a global partnership backed by UNAIDS and the World Bank. The symposium, sponsored in part by Merck & Co. Inc., attracted nearly 100 economists from around the world who presented new evidence on economic aspects of the fast-moving epidemic.
"The world has never seen a problem of this magnitude," Callisto Madavo, World Bank Vice-President for Africa told the gathering. "We need to know more about the economic causes and consequences of the epidemic, and how donor countries and governments in the developing world can work together to prevent new infections and help people who are already ill."
Measuring the economic impact of the epidemic is difficult and controversial, since changes in Gross Domestic Product (GDP) do not reflect the suffering and loss caused by fatal illness. Some countries hard-hit by the epidemic, such as Botswana and Uganda, have sustained good rates of economic growth, lending support to the idea that despite the immense suffering that HIV/AIDS causes, it may not necessarily undermine overall economic progress.
But three new studies presented at the symposium suggest that high levels of HIV infection do significantly reduce growth, making it harder for countries to reduce poverty and to generate the resources needed to cope with the epidemic.
In South Africa, where an estimated 20% of the population is infected with HIV, researchers forecast that GDP will be 17 percent lower by 2010 than it would have been without AIDS. Individual families will also find their incomes reduced.
Another study in Jamaica and Trinidad and Tobago also warned that AIDS would significantly harm economic growth.
A study of diamond-rich Botswana, which has a 36% HIV prevalence rate -- the highest in the world -- warned that the country would face "a rapid increase in the number of very poor and destitute households in the coming decade." Although income from diamond exports would cushion the impact on GDP growth, per capita household income for the poorest quarter of all households is likely to fall by 13%, the study said.
One of the most profound impacts of the epidemic is the lasting damage done to poor children who are orphaned as one or both parents succumb to HIV. A study in Zambia found that 65% of the households in which the mother had died dissolved, with the children usually going to live with elderly female relatives who were themselves very poor and unable to provide adequately for their grandchildren.
As a result, these AIDS orphans were more likely to have to drop out of school and to have worse nutritional status than other children living in intact families. Lack of education and malnutrition would almost certainly condemn these orphans to poverty and social stresses when they grow to adulthood.
There was wide agreement that stemming the HIV/AIDS epidemic will require both more money and efforts to direct these funds to the most effective AIDS programmes. "Africa is burning," said Hans Binswanger, a World Bank economist who is playing a leading role in expanding the Bank's support for AIDS in Africa. "African governments and the international community need to act faster and on a massive scale to stem the epidemic," he said.
Before attending the economics symposium, the Bank's Vice President, Mr. Madavo, announced that the World Bank was developing a US$ 500 million fund to help African governments pay for expanded AIDS programmes. "Dealing with the epidemic requires money and commitment -- and it also requires knowledge," he said at the Durban meeting. "We will be drawing on what you have learned in helping countries."
The articles presented at the symposium were selected from among 80 abstracts submitted in response to an IAEN call for papers. Ten of the authors are researchers from developing countries.
The articles are being revised based on comments from assigned discussants and are scheduled to be published in September 2000 in the South African Journal of Economics. The articles will also be available on the IAEN Web site. For more information, see www.worldbank.org.
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