World Bank: Bulgaria has largest shadow economy in EU
2012-09-14 12:33:50
Too many of Eastern Europe's workers and firms are engaged in the 'shadow economy' and Bulgaria tops the blacklist, a World Bank report shows. The report "In From the Shadow: Integrating Europe's Informal Labor" looks primarily at Bulgaria, the Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Slovenia and Slovakia.
It found that the shadow economy made up 33% of Bulgaria's GDP in 2007 and has not shrunk ever since.
This is followed by Romania (29%), Lithuania (28.5%) and Estonia (28.2%). Austria is at the other end of the scale, with 7.6% of GDP coming from the black market.
European Commission statistics estimate Bulgaria's shadow economy as accounting for 32% of GDP in 2012.
The trend is so wide-spread that it undermines the region's long-term growth potential, the World Bank report warns.
"As the impacts of the euro crisis, population ageing, and labor force shrinkage spread to emerging economies of Eastern Europe, bringing workers and firms in from the shadow economy is critical for long-term economic growth in Eastern Europe," the Washington-based development lender said.
"The governments of the new member states in Eastern Europe simply cannot afford a large shadow economy, neither in the short run due to fiscal concerns, nor in the long run due to the shrinking labor force," World Bank senior adviser, Katarina Mathernova, commented.
Mathernova said the World Bank was continuing its role as a partner with the European in determining how to improve the economic performance of its newest members.
In Bulgaria, Romania, and Slovenia the informal workforce is about evenly split between dependent workers without a legal contract and the nonprofessional self-employed.
Unpaid" family work is highest in Romania and otherwise appears to be significant only in Poland, Greece, Bulgaria, and Italy.
In Bulgaria, Estonia, Hungary, Latvia, and Slovakia, the proportion of males employed without a contract is much higher than that in formal employment.
When the social insurance criterion is used to identify informal dependent workers, the share of noncontributing employees in the new member states (Bulgaria, Czech Republic, Estonia, Latvia, Poland, Slovenia, and Slovakia) who have at least a secondary education is 70% and higher.