likely to deteriorate further. Following the dramatic increase in HIV prevalence rates in recent years in most of the countries covered here, the numbers of AIDScases and of AIDS deaths is projected to rise substantially over the coming years (see Table 2 ). For South Africa, for example, mortality rates are expected to double between 2000 and 2010 (from 1.5 percent to 3.0 percent), reflecting an increase in AIDS-related mortality from 0.7 percent to 2.3 percent. 12 As a consequence, the demand for health facilities and trained health personnel will increase
This paper provides an overview of the potential macroeconomic effects of HIV/AIDS in Botswana, focusing on the key channels through which the pandemic is likely to affect the economic outlook and on the uncertainties involved. To estimate the impact of HIV/AIDS, a dual-economy equilibrium model is constructed and simulated under different scenarios. Depending on exactly how AIDS affects the outlook, GDP growth is projected to fall from around 5½ percent a year without the pandemic to between 1½ and 2½ percent a year with AIDS. Non-negligible redistribution effects across sectors and labor skill categories are also likely to arise. Finally, the paper draws attention to the potential effects of HIV/AIDS on the long-term fiscal position of Botswana, highlighting the need for increased international support and/or lower drug prices so that the widespread introduction of anti-retroviral drug treatments is feasible.
well as the exact number of those infected but not yet ill (data are particularly poor in developing countries). As a result, it is extremely difficult to forecast with any certainty at what point the epidemic will peak and stabilize in various regions, let alone in individual countries. Even so, conservative WHO estimates predict that nine million adults will develop AIDS during the 1990s, on top of one million AIDScases in the 1980s. By the turn of the century, as many as 30 million adults and 10 million children will have been infected with HIV, generating one
benefits. On the other hand, companies who primarily employ casual workers may have little financial incentive to invest in prevention, because they incur only modest benefit costs, if any; because training costs for such workers tend to be low; and because high turnover means that most of these workers will have left the company long before current prevention efforts result in a smaller number of AIDScases.
Once a company faces the possibly huge financial costs of an HIV epidemic among its employees, it will presumably seek ways to reduce those costs. Because death
The paper provides an analysis of the impact of HIV/AIDS on the health sector, public education, the supply of labor and the returns to training in nine Southern African countries. Drawing on the preceding sections, it assesses the impact of HIV/AIDS on per capita income in a neoclassical growth framework. HIV/AIDS affects per capita income mainly through its impact of human capital, as measured by the supply of experienced workers. Other factors include the impact on capital accumulation, on education, and on total factor productivity.
-AIDS counterfactual scenario
The AIDS baseline scenario
C. Alternative scenarios and sensitivity analysis
Permanent decline in the rate of capital inflows
Permanent decline in the rate of capital accumulation in the formal sector
Permanent reduction in the rate of total factor productivity growth in both sectors
Doubling working time losses associated with AIDScases
An AIDS scenario with multiple shocks
IV. Fiscal Implications
A. Health care
B. Other areas of public spending
1. Alternative AIDS
saving and investment, on financial intermediation, and, more broadly, on prospects for economic diversification. These linkages are considered briefly in the following sections.
A. Impact on labor supply
HIV/AIDS will have a dramatic effect on labor supply in Botswana, and hence on the economic outlook more generally. Demographic profiles incorporating the effects of HIV/AIDS indicate that the total population and labor force will start declining later this decade as the HIV infection rate and AIDScases continue to climb, whereas the labor force would have