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Italy to add drug trafficking, prostitution to GDP figures
Published time: May 23, 2014 19:09
Reuters/Yannis Behrakis
The Italian government will include revenue f rom drug traf f ic, prostitution and smuggling while calculating its
gross domestic product (GDP) in a bid to boost its shaky economy.
Starting this October, Italy will include revenues f rom the illegal activities: drug trafficking, prostitution and
smuggling services (cigarettes or alcohol) to its GDP, the countrys national statistics of f ice said on
Thursday.
The methodology for estimating the economic dimension of these activities will be consistent with the
guidelines established by Eurostat," it added.
The move may add up to 2 per cent to Italy's GDP, European Union's statistical service, Eurostat, earlier
predicted. This should bring the countrys new government under Prime Minister Matteo Renzi closer to its
goal - reaching strong growth and lowering the public debt, which the EU says is now the major challenge.
The change in methodology initially comes f rom the EU, which back in January, set new rules f orcing its
member-states to track the value of all activities that produce income, including criminal activities like
"production and consumption of drugs", prostitution and black market alcohol and cigarette sales.
Eurostat issued its guideline on how to count such illegal revenues. Thus, it recommends that the f igure
f or prostitution (to be included under "services") be calculated f rom approximating the "supply" side and the
drug trade f rom the "demand" side.
Italys Istat admits that calculating such income will be very difficult for the obvious reason as these illegal
activities are not reported.
Last time Italy calculated the size of grey of businesses that do not pay taxes was in 2008, when it was
said to be worth between 16.3 per cent and 17.5 per cent of the economy.
Spain, where the size of grey economy is estimated 19.2 percent, announced the switch to the new
method back in January, when Eurostat proposed it. By including illegal activities, Spain expects to add
about 10 billion to GDP in 2014.
Among other countries that turned to the EU method is Britain, where drugs and prostitution is expected to
add over $13 billion to GDP.
However, experts say the new GDP-boosting method may have an underside.
While these countries might enjoy having their GDP boosted by a few percentage points from the shadow
economy, which is notably huge in the periphery, the impact might be less welcome once it starts factoring into
their share of the EU budget, Raoul Ruparel, head of economic research at the Open Europe think-tank
was cited by the Times back in February.
In 2013, Italys public debt rose to 2.07 trillion euros ($2.84 trillion) or 132.6 percent of gross domestic
product, making it the second-biggest public debt as a percentage of GDP among the 18 euro countries,
Istat estimated in March.
Autonomous Nonprof it Organization TV-Novosti, 20052014. All rights reserved.