Revenues from prostitution and illegal drug sales are to be included in Italy’s GDP figures, the country’s government has announced.June 25, 2014 By : Tom Porter Article from IBT
The move could boost the country’s figures by up to 2%, according to the European statistics office Eurostat.
The move has been prompted by new EU rules requiring nations to include revenues from illegal markets in their GDP, to ensure greater accuracy in monitoring the true state of the economy of member states.
Italy has pledged to limit its budget deficit to 2.6% of GDP this year, up from 2.5% last year.
This task becomes easier if there is a boost in its GDP.
Only figures from illegal transactions, such as drug deals or illegal cigarette or alcohol sales are included.
In 2012, Italy’s central bank estimated that the country’s total black market could make up as much as 10% of Italy’s GDP.
Italy’s “shadow economy” of businesses that do not pay tax is estimated to account for as much as 17% of GDP.
Eurostat said that the biggest impact of illegal market figures on GDP would be in Sweden and Finland, where their inclusion could provide a boost of as much as 3% or 4%.
In the UK, the Netherlands and Austria, black market figures are expected to boost GDP by about 3%.
The figures will be used by Brussels to decide how its £120 billion budget is allocated to member states.
The new rules will have the biggest impact on smaller economies, allowing them to push up their GDP by several percentage points, and increase their share of the budget.
Raoul Ruparel, the Head of Economic Research at the Open Europe think tank, told RT that ultimately the figures would be based on estimates, which could be open to dispute.
“The most interesting dynamic will come when they come to recalculate the shares of the EU budget. This is done proportionally according to GDP and the size of the country and a lot of it will ultimately be guess work. It might be questioned how credible these really are when it comes to incorporating limits to GDP.”