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Seminar: The Informal Economy in Bulgaria in a Crisis: New Trends and Methods of Measuring
On 27 February 2009 the Center for the Study of Democracy, in collaboration with Friedrich Ebert Foundation, organized a seminar on the issues of grey economy. The objective of the seminar was to gather expert opinion, information and materials for a forthcoming publication on the informal economy, as well as for future public discussions.

The round table was opened by Mr. Alexander Stoyanov, Director of Research at the Center for the Study of Democracy, and Ms Rositsa Borisova, Deputy Director of the Friedrich Ebert Foundation.

Dr. Andrey Nonchev, Deputy Director of Vitosha Research, presented the Informal Economy Index and the possibilities and limitations of the approach. After a brief overview of the methodology for measuring the informal economy, he focused on the dynamics of informal economy in business and labour relations. Dr. Nonchev highlighted the decrease in employed without labour contract and with contract with “hidden clauses” in 2008. At the same time however he outlined the new challenges in the struggle against informal economy in crisis.

Dr. Valentin Goev from the Statistics and Econometrics Department at the University of National and World Economy focused on the actual informal economy assessment in Bulgaria. According to the data presented the business assessment of the share of informal economy is the highest – 42%. The data also indicate some minimal reduction of informal economy. The most significant reasons for the informal economy existence are: the corruption, followed by non-punished misdeeds, ineffective judiciary system, heavy taxes, and the mafia. In this context Dr. Valentin Goev summarized the measures to be taken to counter these phenomenon: dealing with corruption, increasing the effectiveness of judiciary system, stimuli for business and higher tax control.

Mr. Ruslan Stefanov, Coordinator of the Economy Program at the Center for the Study of Democracy, examined some policy measures for reduction of informal economy, such as the introduction of obligatory labour contract registration in 2005, the pressure on behalf of the Ministry of Labour and Social Policy for observing the demand, as well as the attempts for decreasing the informal economy in other sectors. According to Mr. Stefanov, it is necessary to examine informal economy on sectoral level, its networks and mechanisms. He also outlined a negative trend – changes in key control agencies and their decline of control capacity.

During the discussion the participants questioned the reliability of the data presented for the Czech Republic and Estonia. According to the data the share of illegal economy in Estonia is about 2-3%. According to the National Statistical Institute (NSI) in Bulgaria it accounts for 1,4 – 1,5% of the economy.

Mr. Todor Todorov, Head of National Accounts Department at the National Statistical Institute focused on the reluctance of the older Member States to present any statistical information or macroeconomic indexes related to the illegal economy due to the information instability. The new Member States on the other hand have official data – in the Czech Republic for instance, illegal actions represent 1,3 – 1,5% of the GDP. Mr. Todorov highlighted the necessity of exchanging information about illegal actions and consolidation of the information for achieving reliability in the NSI analyses.

Mr. Lyubomir Dimitrov, Director of Department Macroeconomic Analyses at the Agency for Economic Analyses and Forecasting focused on the methodology for investigating informal economy and highlighted the obligatory simultaneous application of direct and indirect methods. Mr. Dimitrov questioned the increase of informal economy during crisis, stating that the shrinkage of the sectors at highest risk – tourism and construction – would lead to shrinkage of the total volume of informal economy, although at slower pace.

Dr. Plamen Chipev, Senior Fellow at the Economic Institute of the Bulgarian Academy of Sciences questioned the use of the VAT method as a direct evidence of informal economy and whether part of the drain actually means VAT fraud. He put an accent on the aspiration for dealing with informal economy as an aspiration to get a clear idea of the actual production. Dr. Chipev stressed on the relation between good corporate governance in crisis and the transparency of the companies, achieved by their listing on the stock-market.

Mr. Ruslan Stefanov completed the official statements, highlighting the necessity of the adoption of a law to regulate the financing of political parties, which would reflect on the state of informal economy.

The event was organized with the financial support of Operational Programme “Administrative Capacity”, co-financed by the European Union through the European Social Fund. The seminar was also organized with the cooperation of Friedrich Ebert Foundation.

Picture gallery:

Agenda and information about the seminar (Adobe PDF, 57 KB)
Presentation of Dr. Andrey Nonchev, Deputy Director of Vitosha Research (Power Point, 1.6 MB)
Presentation of Dr. Valentin Goev, Statistics Department, University of National and World Economy (Power Point, 359 KB)
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