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Volume of Kyrgyz Shadow Economy in 2014 Reaches 48% of GDP

Saturday 28 March 2015

BISHKEK (24.kg news agency) – Volume of shadow economy in Kyrgyzstan in 2014 reached 48% of GDP, the First Vice Prime Minister of Kyrgyzstan Taiyrbek Sarpashev said today at a meeting of the Government.

According to research of the National Statistics Committee, from 2002 to 2003, the size of the shadow economy reached a peak, 16.5 and 17% of GDP. After two revolutions, political and economic instability, the size of non-observed economy in 2014 rose up to 21% of GDP. At the same time the economy of the Kyrgyz Republic came up short 25.07 bln soms, or $420 mln because of the shadow turnover.

Measurement of the shadow economy is notoriously difficult as it requires estimation of economic activity that is deliberately hidden from official transactions. Surveys typically understate the size of the shadow economy but econometric techniques can now be used to obtain a much better understanding of its size. Taiyrbek Sarpashev explained: “Department of economy and investment Academy of Public Administration of the Kyrgyz Republic held expert assessment. They cite other figures. According to them, the maximum size of the shadow economy was in 1998-2001. Then the volume of production in the shade was 58% of GDP. Since 2001, the size of the shadow economy began to decline. Preliminary assessment suggests that in 2014 the volume of production in the shadow economy was 143.6 bln soms. In this case, the 2014 budget didn’t get around 57.3 bln soms, or $974.8 mln. Thus, since independence, the country hasn’t received 258.8 bln soms, or $6.07 bln. Having such a huge internal reserve, the state has an external debt of $3.08 bln. It could be paid off at the expense of this money.”

Comparatively, the shadow economy constitutes approximately 10% of GDP in the UK; about 14% in Nordic countries and about 20-30% in many southern European countries. In less developed countries, the informal sector constitutes typically between 25 and 40% of national income and represents up to 70% of non-agricultural employment. In such countries, informal activity often arises because of the inadequacies of legal systems when it comes to formalising business registration.

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