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July 7, 2017 www.intellinews.com I Page 12
Azerbaijan's shadow economy a staggering 66% of GDP
bne IntelliNews
Azerbaijan had the largest share of shadow economy to GDP of the 28 countries included in a study published by the Association of Char- tered Certified Accountants (ACCA) in June. At an estimated 66.12% of GDP in 2017, Azerbai- jan's shadow economy surpasses that of In- dia (16.55% of GDP), China (10.17%), Bulgaria (29.85%), Ukraine (45.96%) and even Nigeria (47.7%).
The study, titled "Emerging from the shadows", used a combination of futures research tech- niques like horizon scanning and scenario plan- ning alongside a projection model to forecast the possible evolution of the shadow economy. Estimated at 23% of the global GDP in 2017, the shadow economy is expected to fall to 21% by 2025, according to the study.
In Azerbaijan, however, it will remain a signifi- cant part of total economic output — 58.58% — even in 2025, according to the ACCA study. The consultancy cites corruption, a non-democratic governance system and dire economic growth prospects as the main reasons behind the large shadow economy in Azerbaijan.
Based on International Monetary Fund (IMF) data, its estimates place the shadow economy in Azerbaijan at AZN40.22bn (€21bn) in 2016, compared to a GDP worth AZN67bn.
By contrast, the government statistics agency, Azstat, placed the figure at only 9.1% of GDP in 2015.
According to the respondents to ACCA's surveys, the two most decisive factors that can lead to an increase in illegal economic activity are econom- ic crises or recessions and high unemployment levels. Conversely, addressing these factors can help tackle the problem of the shadow economy.
The Azerbaijani economy has been in reces- sion over the last year, with its economic output contracting by 3.8% in 2016 and expected to drop by a further 1.4% in 2017 due to low commodity prices. Meanwhile, the environment of impunity in the country, where evading taxes is relatively easy and even the large businesses that control swathes of the economy and are linked to the ruling elites are not registered with the tax reg- istry, contributes to the problem.