ASSESSING THE IMPACT OF AIDS ON THE GROWTH PATH OF THE MALAWIAN ECONOMY

A modified Solow growth model is used to simulate the impact of the AI DS epidemic on output capacity and other key macroeconomic aggregates in Malawi. Comparing a counterfactual no-AIDS scenario to 'medium' and 'extreme' AIDS projections suggests that average real GDP growth over the 1985-2010 period will be 0.2-0.3 (1.2-1.5) percentage points lowe r in the medium (extreme) case, relative to the no-AIDS case. As a res ult, the size of the economy by the year 2010 will be reduced from a r eal GDP of 5.03 billion (constant 1985) Kwacha without AIDS to 4.81-4. 77 (3.80-3.46) billion Kwacha in the medium (extreme) scenario.