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sheds light on economic ills of Aids  Dow Jones 26th September, 2001. South Africa's gross domestic product (GDP) could fall 5,7 percent by 2015 as the effects of the country's HIV/Aids epidemic works its way through the economy, according to a report released yesterday by the Bureau for Economic Research. The study was compiled with projections from the Actuarial Society of SA and Abt Associates/Metropolitan, and examined the macroeconomic effect of the HIV/Aids epidemic on South Africa over the next 15 years. The report assessed the effects the virus could have on the country's population, labour force, economic productivity, government expenditure and the cost to businesses. Between 4 million and 6 million people, or about 11 percent of the population, are estimated to be HIV positive. As a consequence, the study said South Africa's total labour force was projected to fall 21 percent by 2015 compared with a no-Aids scenario, while the overall size of the labour force was likely to remain almost stagnant over the next 14 years. It said the difference between an Aids-inclusive and no-Aids labour force by 2015 could be 16,8 percent in the case of highly skilled workers, 19,3 percent for skilled and 22,2 percent for semiskilled and unskilled workers. Commenting on the economy, the study estimated that producer prices could rise by 2,3 percent a year between 2002 and 2015, while prime interest rates could jump by 2,9 percent compared with a no-Aids scenario. Both factors would have an adverse effect on economic growth and job creation, the report said. The inflationary pressure is expected to stem from higher producer prices, as salaries and wage rates increase as the epidemic exacerbates the country's skills shortages. "Given a monetary policy of inflation targeting, the increase in inflation is likely to spill over to interest rates," the report said. "Additional pressure is exerted on interest rates due to lower domestic savings compared with a no-Aids scenario and some deterioration in the overall balance of payments," it said. The effects of the HIV epidemic are also expected to have a negative effect on final household consumption expenditure, which in turn will be due to a decline in the population and a drop in employment and income levels. "This sector is likely to witness substantial shifts in spending, changes in the distribution of income and the activation of savings to protect living standards in the face of increased health-related expenditure," the report said. The bureau said consumer spending on durable goods and semidurable goods could be the most vulnerable to the projected shifts in spending in favour of healthcare products and services and the increase in interest rates. "Spending on semidurable and non-durable goods has a proportionally larger exposure to the black consumer market and is more vulnerable to the demographic impact," the bureau said. "Furthermore, the non-healthcare components of non-durable goods spending and spending on services could also experience a substantial negative impact," the report said. It said the overall effect on South Africa's GDP growth would be negative, but was likely to manifest itself gradually. "Compared with a no-Aids scenario, the level of real GDP is projected to be 1,5 percent lower by 2010 and 5,7 percent lower by 2015," the report said. "In year-on-year growth terms this translates into declines in the average annual growth rate of 0,1 percent (2002 to 2005); 0,3 percent (2006 to 2010); and 0,9 percent (2011 to 2015)," the bureau said. |
