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Russia: Economic Impact Of HIV/AIDS Could Be Enormous

Much has been made in recent years of the cost in lives of the HIV/AIDS epidemic in Russia and the former Soviet Union, but there has been less discussion of its economic consequences. Analysts tell RFE/RL that as the number of infections rises, so too will the costs -- both in terms of greater health-care needs and on diminished labor productivity.

Prague, 22 September 2003 (RFE/RL) -- Since 1998, the number of HIV/AIDS cases in Russia has grown twentyfold. By the end of this decade, the number of patients is expected to rise to 1.4 million, with an estimated 100,000 people dying a year from AIDS.

This fact -- while horrific -- is generally accepted. But what is not often factored in is the economic costs of the crisis. Steven Massey, of the New York-based nongovernmental organization Transatlantic Partners Against AIDS, says the costs of the epidemic -- if unchecked -- could be far greater than people realize.

"Russia's GDP [gross domestic product] in 2010 could be up to 4 percent lower than it would have been in the virus's absence," he said. "That number would increase to over 10 percent by 2020."

Such a development would severely curtail the country's desire someday to approach the European Union's level of development. The Russian economy is currently growing at some 5-6 percent a year and officials have said they would like to sustain growth rates of 7-8 percent a year.

Massey says HIV/AIDS increasingly will require authorities to divert scarce resources to the health sector to provide medication and care for the sick. In the absence of HIV/AIDS, these resources could be used for capital investment to promote economic growth.

Massey points out that Russia's population is aging. He says HIV/AIDS will magnify this problem: "As Russia's population ages, the majority of Russia's pensioners will require expensive health care that the working age population will struggle to provide. So a large and growing HIV population therefore will only add to that fiscal burden."

Massey says Russian authorities so far are not spending enough to avoid a worst-case scenario. He says this year the Russian government is spending only about $4 million on HIV/AIDS treatment. He says Brazil, which has roughly the same population and GDP, spends about $200 million on treatment alone, and prevention programs are even more than that.

Christof Ruehl, the chief economist of the World Bank's Russia office, says the economic consequences of HIV/AIDS extend well beyond the health sector and will affect all parts of the economy. In a recent article published on the organization's website, he said the epidemic will have a strong negative effect on labor productivity.

Naturally, the supply of labor will decline as people become sick and die earlier than expected. But aspects such as increased fear, anxiety, and stress will all play a role.

Ruehl says the authorities do not understand the potential size of the problem because they don't properly understand the nature of HIV/AIDS.

Without treatment, the average length of time from initial HIV infection until death from AIDS is about 12 years. But 12 years ago, HIV was almost nonexistent in Russia, and the actual number of people dying today from AIDS is still relatively low.

Moreover, the disease affects mostly drug users. Taken together, these factors form a powerful obstacle to attempts to stem the spread of HIV.

Ruehl says an antiretroviral treatment, using a combination of drugs, can prevent AIDS as long as the drugs are taken regularly. The problem is that the cost of this treatment -- as high as $9,000 a year -- is out of reach for most people.

Nicolas Redman is a Russia analyst with the Economist Intelligence Unit. He agrees that the authorities do not yet fully understand the scope of the problem: "It's difficult for a government in the position of the Russian government to look ahead and be anticipating problems, [as] the data are still coming out. Since the infection rate is [still relatively] low, it doesn't seem to make a powerful argument for making this area a priority."

The World Bank warned in a recent report that the situation could get out of control soon. HIV/AIDS has started to spread from the drug-using to the nondrug-using population -- primarily through infected blood donations and unprotected sexual intercourse.