HIV/AIDS: Does it Increase or Decrease Growth in Africa

Infectious diseases matter greatly for Africa. Cross-country regressions for the 1990-97 period suggest that HIV/AIDS has reduced the rate of growth of Africa’s per capita income by 0.7 percentage points per year. For those African countries affected by malaria, growth was further lowered by 0.3 percentage points per year. Such reduction is large when compared with the historical growth of 0.4 % achieved in 1990-97. Various factors related to poverty, inequality, gender inequality, labor mobility and ethnic fractionalization have facilitated the rapid spread of HIV. But what has enabled HIV/AIDS to undermine economic and social development is the erosion of some of the main determinants of economic growth such as social capital, domestic savings and human capital. Through such channels the HIV epidemic was transformed from a health issue into an economic disease that impairs economic and social development. Because it prevents an increasing share of the population from participating in economic growth, the HIV/AIDS epidemic increases poverty. The result is a vicious circle whereby HIV/AIDS reduces economic growth and increases poverty, which in turn accelerates the spread of HIV. Without strong and immediate action, it will prove quite difficult to overcome the cost of inaction latter on. 1 The results included in this paper should be viewed as preliminary. The opinions expressed here do not necessarily reflect those of the World Bank.