The level of the shadow economy in Ukraine in January-September 2020 amounted to 31% of GDP, which is 3 percentage points (p.p.) more compared to the same period in 2019, according to an analytical report of the Economy Ministry.
“The spread of the pandemic and the complication of the conditions for economic activity, formed as a result of the introduction of forced restrictive measures, led to the growth of the shadow economy in Ukraine. According to preliminary calculations of the Economy Ministry, the level of ‘shadow’ in January-September 2020 amounted to 31% of the volume of official GDP, which is 3 p.p. more than January-September 2019,” according to the repot posted on the ministry’s website on April 21.
At the same time, the ministry said that different methods show different dynamics of the level of the “shadow” in the economy, which indicates the atypical nature of the coronavirus crisis in comparison with other crisis periods.
So, of the four methods used to assess the “shadow”, the growth of its share over the nine months of last year compared to January-September 2019 was shown only by the method of unprofitability of enterprises – by 12 p.p., to 32% of GDP, according to the materials of the Economy Ministry.
Two more methods showed a reduction in the share of the shadow economy in Ukraine over the specified period: by 1 p.p., to 23% of GDP – according to the method of population expenditures – retail trade and services, and by 1 p.p., to 25% of GDP – according to the electric method.
“Considering the reasons that led to a reduction in the shadow economy by these methods, it is worth noting the presence of objective factors caused by the coronavirus crisis that limited the channels for carrying out shadow activities. In particular, in trade there was a limited possibility of selling goods on unorganized sites,” the ministry said.
As for the result of the assessment using the electric method, the decline in production due to the contraction of the world economy and the investment pause affected this, so that the reduction of the “shadow” according to this method is a purely mathematical result, the Economy Ministry said.
At the same time, according to the monetary method, the dynamics of the shadow economy in January-September 2020 remained unchanged – 31% of GDP.
As noted in the analytical report, most types of economic activity showed a tendency towards an increase in the level of the shadow economy.
In the sectoral context, the highest level of “shadow” in the past year was recorded in the sector of transport, warehousing, postal and courier activities – 54% of the gross value added of the industry, which is by 22 p.p. more than the indicator for the nine months of 2019.
In the mining industry, according to the ministry’s estimates, the level of the shadow economy increased to 39% and in real estate transactions by 14 p.p. up to 44%.
In financial and insurance activities and agriculture, the ministry recorded a decrease in the share of the “shadow” in January-September 2020 by 4 p.p., to 27% and by 2 p.p., to 30%, respectively.
Among the factors that affect the shadowing of the economy, the ministry named a low level of protection of property rights, a poor judicial system, a high level of corruption, as well as the presence of territories which are not controlled by the government.
