Include illegal economic activities in economic evaluation- IMF

The International Monetary Fund’s regional technical assistance centre in Southern Africa's advisor, Gregory Legoff, has advised Namibia to include illegal economic activities based on mutual agreements in the assessment of economic growth in order to have a more accurate picture. 

Legoff was speaking at a public presentation on national accounts and rebasing at an event hosted by the Namibia Statistics Agency (NSA). 

“Drug trafficking and prostitution maybe illegal but they are part of the GDP. It may be illegal by law or illegal because it’s undertaken without authorisation but it is an economic activity because there is consumption,” he said. 

However, experts have submitted that there is an ethical or moral issue that arises in attempting to include the underground economy in official GDP figures. 

“The question that comes to the forefront is if activities such as drug sales or prostitution are recognised as activities that provide economic growth and contribute to a nation's GDP, on what basis then can the government brand such activities as illegal?” writes Investopedia. 

Legoff said government could rather focus on activities in the underground economy that are being done on a significantly larger scale. 

“In countries like Colombia drug trafficking is big, they have made efforts to include that in their GDP. Prostitution is being done in the UK and they have done surveys. South Africa has estimates for drug trafficking, it’s not done in may countries but we encourage this design particularly during the rebase,” he said. 

In his presentation, he said rebasing is necessary to incorporate structural economic changes in the estimates and measures growth accurately.

The move to factor in the illicit trade in drugs and prostitution was estimated four years ago to add £65bn, almost 5 percent of the overall UK economy, to the economy. 

This has however been unpopular with many commentators in Europe. 

However, Investopedia reports that the underground economy is estimated to account for as much as one-third of the total economy in developing countries and slightly more than 10% of the total economy in developed countries.

A number of countries including Ireland and Italy have also begun to change the way they calculate their respective GDPs, factoring in illegal activities, a move which could see billions of dollars added to the GDPs of a number of European economies in the near future reported the Financier in 2014. 

More European countries are expected to follow suite. 

Although the idea is welcome, but it does not currently fall anywhere near what NSA is mandated to do.

However, The Villager wanted to know if this did not have a potential to justify crime. 

“I don’t know how it will encourage crime but obviously we can not do that because it is not part of our scope. But it will be good to be aware of those transactions that are illegal. It will curb illegal activities and bringing it out shows how it affects the economy negatively,” said NSA chief executive officer, Alex Shimuafeni.