June 17, 1996

Study Shows AIDS Slowing Economic Growth in Africa

Asian Economies Could Also Suffer as Epidemic Spreads

The study, released today by the Washington-based International Food Policy Research Institute (IFPRI), analyzed population forecasts of the United Nations, World Bank, and U.S. Bureau of the Census to explore the cost of AIDS and the impact of the disease on population and economic growth. The study, written by IFPRI Research Analyst Lynn R. Brown, draws on AIDS research conducted around the world. It projects the implications of the AIDS pandemic for food, agriculture, and the environment through the year 2020.

To date, the most devastating effects of the HIV/AIDS pandemic have been concentrated in Sub-Saharan Africa, where most HIV transmission occurs in the heterosexual community. The IFPRI study reports that the growth of gross domestic product (GDP) per capita in Sub-Saharan Africa could decrease by as much as 1.4 percent as a result of AIDS—a significant reduction in a region where the per capita growth rate of GDP averaged –0.8 percent annually from 1980 to 1992.

"As more and more people grow sick and die from HIV and AIDS, the economies of Africa and Asia are likely to suffer," said IFPRI Director General Per Pinstrup-Andersen. "Just as AIDS weakens the human body, the disease saps energy from developing-country economies. This study is a warning cry to governments and funders worldwide that we must be involved in arresting the AIDS epidemic in Africa and preventing a pandemic in Asia."

Experts believe that by the year 2000 most new HIV infections will occur in Asia. Newly reported AIDS cases quadrupled in Thailand, tripled in Myanmar, and almost doubled in India between 1992 and 1993. With the high level of trade and migration among Asian nations, the disease is likely to spread throughout the region and affect the economies of wealthier nations, the report noted.

"Many Sub-Saharan African countries are already experiencing HIV and AIDS epidemics on a massive scale, and all signs indicate that several countries in Asia may be set to follow the same path, if not a more difficult one, if they fail to address the problem in the early stages," the report reads. "The increasing integration of economies and high levels of population movement, both within and between countries, ensure that, in time, virtually no country will be untouched by AIDS."

Economic Impact Felt on Many Fronts

AIDS weakens economies by striking several key areas at once. The study identified effects on savings and investment, production, labor, health care, education, and other areas. Among the report's findings are the following:

Savings and investment. Resources will be shifted from productive investment to health sector expenditures and health care. The long-run result will be lower domestic capital formation, diminishing the capacity for future economic growth.

Lost labor and production. When a worker becomes too sick to work, a productive lifetime of earnings is lost to the economy. In addition, the savings from those earnings, which could have gone to investments in economic growth, are lost.

Education and health. Shifting funds to combat AIDS may lower investment in both education and health care (to tackle diseases other than AIDS), with consequences for future economic growth. By shortening life spans, AIDS also lowers the returns to public investment in both health and education.

Other areas of investment. As AIDS reduces economic growth, the competition intensifies for both national and international resources. Investment in agricultural research, sanitation, and other areas is likely to fall.

Impact on Working People

AIDS is particularly devastating to economic growth because the disease strikes at people in their most productive years. Furthermore, the epidemic seems to be spreading fastest among people with above-average education and skills, further sharpening the economic impact.

"The selective impact of AIDS, largely on the population in its most productive years, combined with an initial disproportionate effect on the most productive members of society, has the potential not only to reduce economic growth but also to alter the economic structure," the report says.

"If HIV infection and AIDS are not randomly distributed across a population, but concentrated in particular population subgroups that have higher than average economic productivity, then the effect of AIDS on domestic capital formation will be magnified, because those with higher wages are likely also to have higher levels of saving."

In Rwanda, women whose partners had higher income levels and worked in higher-paid and higher-skilled occupations were also more likely to be HIV-positive than women whose partners were less well off. Similarly, in Uganda, men and women with secondary education were more than twice as likely to be HIV-positive as men and women with no education. In Kenya, the average annual income of a worker with AIDS was estimated to be 31 percent higher than the average national income.

Despite the initial higher impact of AIDS on urban elites, in the long run AIDS will hit the poor hardest. Richer people will be more receptive to education campaigns through the mass media, more able to purchase condoms, and more likely to live in environments that encourage condom use. AIDS will worsen the poverty of poor people by depriving them of their only productive resource their labor.

"It is the poor, with their poorer health status, inability to purchase condoms, and lack of access to information and education campaigns, who will ultimately suffer the most from AIDS," the report notes.

IFPRI was established in 1975 to identify and analyze policies for sustainably meeting the food needs of the developing world. IFPRI is one of 16 international research organizations supported by the Consultative Group on International Agricultural Research (CGIAR), an informal association of some 40 countries, international and regional organizations, and foundations whose mission is to contribute to sustainable improvements in agricultural productivity.