1. MEASURMENT OF NON- OBSERVED ECONOMY IN THE NATIONAL ACCOUNTS OF UKRAINE Agenda item 6d Workshop on the Implementation of the 2008 SNA, Kiev, 29 November – 2 December 2011 MOSKVIN Aleksey Alekseyevich Deputy Director of Macroeconomic statistics

2. Classification of non-observed economy «Measurement of non-observed economy» Manual OECD, IMF, ILO, CIS-STAT 2002. Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics 2 Non-observed economy Underground InformalIllegalOther Statistical reasons Economic reasons Non- response Not in the lists Liquidation Mis- reporting Not regis- tered Т1Т2Т3Т4Т5Т6Т7Т8

3. Data Sources and Assessment Methods Corporations Statistical Reasons Т1, Т2, Т3 Structural business statistics data on reasons for not reporting to surveys  Т1 – not reporting (delays in reporting) – 0.01% of output  Т2 – not founded at address (but were active and had sales) – 0.8% of output  Т3 – bankruptcy, liquidation, suspension of operations (but were active and had sales) – 0.3% of output Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

4. Data Sources and Assessment Methods Corporations Т4 Misreporting 1. Structural business statistics data on output per one employed  Output per one employed in small enterprises is 48% of large and medium-size ones 2. Data of business activity surveys  What is the level of underground production in your industry? 3. Data of labour statistics surveys  Ratio of the recorded wage earners and unofficial employees (10.3% in total, in construction– 43%, in trade– 19%, in transport– 16%, agriculture – 13%) 4. Total adjustment is 10.2% of NFC output Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

5. Data Sources and Assessment Methods Households Т5 Non-Registration, Т6 Informal Sector, Т8 Production for Own Consumption and Tips Data Sources  production by households (agriculture statistics)  goods turnover of trade and turnover of individuals entrepreneurs in the restaurant industry, goods turnover of informal markets (trade statistics)  individual housing construction (investment statistics – estimate by administrative data on number of permits for construction)  repair of housing (estimate by amount of purchases of construction materials)  output estimate of goods and services by amount of purchases in the market and from citizens (households living conditions surveys)  imputed rent (stratified estimate by living area and rent price data)  education and health care services (estimate by number of students and surgeries)  SUBSTRACT registered personal income of employers (National Tax Office) Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

6. Allocation by types  Ratio of not-registered employees (Т5 non- registration) and self-employed, and entrepreneur's family members (Т6 informal sector) according to labour statistics  Agricultural production for own consumption, tips in transport, hotels and restaurants are included in Т8 type Data Sources and Assessment Methods Households Т5 Non-Registration, Т6 Informal Sector, T8 Production for Own Consumption and Tips Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

7. Non-Observed Economy by Industries NACE 200120022003200420052006200720082009 Agriculture (A,B) 9.29.29.39.38.08.07.27.26.26.25.25.24.54.53.93.94.24.2 Industry (C,D,E) 2.62.63.33.33.03.03.73.74.14.13.83.84.74.73.73.73.53.5 Construction(F) 0.70.70.60.60.60.61.11.11.11.11.31.31.71.71.21.21.01.0 Trade (G,H) 2.32.32.82.83.53.53.53.53.33.33.63.62.72.74.04.04.64.6 Transport and communications (I) 0.30.30.60.60.60.61.41.41.01.01.11.10.30.30.50.50.60.6 Others (J- P) 1.01.01.11.11.51.52.02.02.32.32.32.31.61.61.81.82.72.7 Total in % to GDP 16.317.717.218.918.117.315.515.116.7 Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

8. Non-Observed Economy by Industries Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics 8

9. Non-observed economy by type Statistical reasons Economic reasons Informal and other Total Т1, Т2, Т3Т4, Т5Т6, Т8 2002 1,26,310,217,7 2003 1,37,38,617,2 2004 1,19,78,118,9 2005 0,68,98,518,1 2006 0,710,66,017,3 2007 0,99,75,015,5 2008 0,89,64,715,1 2009 0,810,75,116,7 Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics 9

10. Non-observed economy by type Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics 10

11. Т7 Illegal Activities Estimate of Illegal Activities by type :  prostitution  drug production and distribution  smuggled goods  illegal alcohol production Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

12. Illegal Activity Data Sources  Ministry of Internal Affair (withdrawn drugs, thefts, penal sanctions for law violation)  Customs Service (confiscated contraband property)  Data from International Institutions (for example, WHO on consumption of alcohols, tobacco, drugs)  Mass media and specialized research  Statistical sources (production statistics, foreign trade statistics, surveys of household living conditions)  Own assumptions (rate of drugs confiscation by type)  Balances in kind and in value on the production and consumption of goods and services Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

13. Illegal Activity Estimated Transactions in the SNA  output  intermediate consumption  GVA  including compensation of employees  household consumption  exports and imports Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

14. Prostitution  Estimate of the number of employed and quantity of the services rendered (based on consumption)  Stratification by price of services  Estimate of the value of services  Estimate of intermediate consumption  Export is estimated using the number of residents abroad and the share of prostitutes in population  Import is not assessed because of its minor importance Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

15. Drug Production and Distribution  Estimated number of users  Stratification by types of drugs used  Assessment of average consumption and prices  Estimate of household expenditures  Allocation of estimated consumption to domestics output, import and trade margin, estimate of intermediate consumption Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

16. Smuggling  Value of smuggled goods is estimated using the value of confiscated goods and own assumptions (% of confiscated to total)  Additional data from the Customs Service on the estimated illegal export of alcohol and tobacco, and import of drugs  Output = trade margin (% of value of smuggled goods)  Intermediate consumption - % of output  Labour compensation - % of valued added Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

17. Illegal Alcohol Production  Source data– consumption of absolute alcohol according to WHO  Supply and demand are balanced in kind and in value terms for 4 types of alcohol products: Output + import = export + household consumption  The imbalances are allocated to: - underreporting of data - production for own final use by households - illegal alcohol production - illegal import Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

18. Итоги по типам деятельности (производственный метод, % от ВВП)  Проституция – 0,3%  Производство и распространение наркотиков – 0,1%  Контрабанда товаров – 0,7%  Нелегальное производство алкоголя – 1,1%  Всего – 2,2% МОСКВИН Алексей Алексеевич Заместитель директора департамента Макроэкономической статистики 18

19. Promising Trends to Extend the Coverage of Illegal Activity Assessment  resale of stolen property  unlicensed (illegal) medical practices  poaching  production and trade in unauthorized copies of artistic originals; software, CDs and videos  human trafficking  money laundering Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics

20. Thank you ! Aleksey Alekseyevich MOSKVIN Deputy Director of Macroeconomic Statistics