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According to data from the Federal AIDS Center, the number of registered cases of HIV is doubling every 12 months, and reached 193,400 as of May 1. Estimates of the total number of infected individuals depend on the "multiplier" used to translate registered into actual cases, and estimates therefore vary from 800,000 to more than 1 million. Without treatment, the average time span between contracting HIV and death after AIDS has fully developed is about 12 years.
However, given that 12 years ago HIV was almost nonexistent in Russia, actual mortality figures are low. Moreover, the disease mostly affects drug users.
These two factors taken together form a major obstacle to attempts to stem the spread of HIV. It is difficult to convince politicians to address a problem that will only become visible years from now, and that seems to affect mainly people who enjoy little respect in society. Indeed, there still seems to be the perception that urgent measures are not needed in Russia in spite of the alarming figures.
Such an attitude will be very costly, both socially and economically. Last month, the World Bank unveiled a computer model that for the first time makes it possible to simulate the economic costs that HIV could impose on Russia. This model allows any user to specify his/her assumptions about future economic and demographic trends. The results are disturbing, even when based on very conservative assumptions.
The most obvious economic costs associated with the disease are those of treating people with AIDS and of preventing the development of AIDS in those who are HIV positive. Anti-retroviral treatment can prevent AIDS as long as the drugs are taken regularly, but it is expensive, costing about $9,000 per patient per year. Recently, several countries managed to negotiate costs down, but even the resultant $3,000 per patient per year would overwhelm the healthcare budget in a country such as Russia, where per capita gross domestic product last year was about $2,000.
However, the potential burden of treatment and prevention is only one aspect of the economic consequences of HIV, and not even the most important one. Labor supply declines when people die, but labor productivity starts falling much earlier: Anxiety, the need to maintain support systems and the need for home care all have a negative effect on labor productivity. Evidence from other countries suggests a strong link between the share of HIV-infected and the overall labor productivity of a country, reflecting the disease's impact not only on those infected, but on friends and family as well.
In addition, whether financed by the budget or by private contributions, the cost of anti-retroviral treatment constitutes a massive diversion of funds away from investment to consumption. Moreover, the savings of HIV-infected individuals decline as they shift resources into healthcare and as their time horizons shrink. Studies from South Africa indicate that "HIV-infected households" may cease to save altogether.
Russia's negative population growth compounds the problem, because it impedes investment and economic growth on the one hand and makes maintenance of stable public service provision more difficult on the other. HIV disproportionately affects young people who, without the disease, would continue to be active members of the labor force for a long time. About 60 percent of HIV-infected individuals in Russia are between 20 and 30 years old.
As for the bottom line, the World Bank model confirms the staggering human costs of HIV if anti-retroviral treatment continues to be unavailable. If no policy changes are made, mortality rates will be in the thousands per month by 2010 and the cumulative number of HIV-infected individuals will rise to at least 2.3 million.
Based on conservative assumptions, the model predicts that by 2020 GDP will be 10 percent smaller than it would be if HIV were to stop spreading today -- accompanied by even larger declines in investment and labor supply. As time goes by, these costs accumulate more rapidly. Most importantly, if HIV continues unabated, it will undercut Russia's long-term economic growth rate more and more severely. By 2020, growth will be lower by a full percentage point per annum -- which is substantial for a country in such urgent need of rapid growth as Russia.
The overall impact on the economy (based on conservative assumptions) is significant over time, although initially not as dramatic as might be expected, because a majority of the HIV-infected today are drug users whose productivity is low already.
The World Bank study suggests that, in addition to targeting needle exchanges, safe sex and improved testing, a campaign to limit drug use would be among the most effective policies for containing the spread and thus the economic costs of HIV.
This may be difficult but surely waiting is not an option: HIV has started to spread from the drug-using to the non-drug-using part of the population, with tainted blood supplies, "normal" sexual interaction and, most importantly, prostitution as the main channels. Once entrenched, it will be even harder to dislodge and the economic consequences will be even more difficult to deal with.
Russia's predicament thus presents a threat as well as a window of opportunity: A major humanitarian and economic disaster can be averted by stopping the spread of the disease now. Russia cannot afford to let this opportunity pass.
Christof Ruhl, chief economist of the World Bank's Russia office, contributed this comment to The Moscow Times. The model discussed above is available at: www.worldbank.org.ru
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