This paper develops a model of optimal growth to assess the risks of an HIV/AIDS epidemic and the expected economic impacts in 9 countries in the Middle East and North Africa region: Algeria, Djibouti, Egypt, Iran, Jordan, Lebanon, Morocco, Tunisia, and Yemen. The mode l incorporates an HIV/AIDS diffusion component based on two transmission factors: sexual intercourse and exchange of infected needles among IDUs. Given high levels of uncertainty regarding the model parameters that determine the dynamics of the epidemic and its economic impacts, we explore large regions of the parameter space. Only in 16% of the cases the prevalence rates in year 2015 would be below 1%; in 50% of the cases prevalence rates would be above 3%. On average, GDP losses across countries for the period 2000-2025 could approximate 35% of today's GDP. In all countries it is possible to observe scenarios where losses surpass today's GDP. We quantify the impact of expanding condom use and access to clean needles for IDUs. We show that these interventions act as an insurance policy that increases social welfare. We also show that delaying action for 5 years can cost, on average, the equivalent of 6 percentage points of today's GDP
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