OWN CORRESPONDENT, Johannesburg | Tuesday 2.00pm
THE country’s escalating Aids epidemic is set to dampen economic growth, exacerbate a skills shortage, increase inflation and squeeze savings and investment,according to a report by investment bank ING Barings.
The report entitled ”The economic impact of Aids in South Africa — a dark cloud on the horizon”, predicts that the epidemic will reduce gross domestic product (GDP) growth by 0,3 to 0,4 percentage points.
”The lower growth and higher risk profile for South Africa will not bode well for financial markets and may well deter foreign investors,” it said.
South Africa has one of the highest rates of HIV infection in the world. An estimated 1 700 people are infected every day and according to government statistics, about 12% of the 40-million population are HIV-positive. ING Barings forecast that the infection rate would peak at almost 17% by 2006 for the overall population – but said it could reach 26% among the economically active population and 30% for the unskilled and semi-skilled.
Using a model constructed by the Actuarial Society of South Africa, ING Barings predicted that the total population would be 23% lower by 2015 than without Aids. These costs would be passed onto consumers and increase consumer price inflation, the report said, exerting upward pressure on interest rates. ING Barings also predicted the epidemic would shave two percentage points off domestic savings as a percentage of GDP, forcing South Africa to rely even more heavily on foreign inflows that it already does.– Reuters