rt .co m http://rt.com/news/161140-italy-drugs-prostitution-economy/

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 itsgross 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 andsmuggling services (cigarettes or alcohol)” to its GDP, the country’s national statistics of f ice said onThursday.

“The methodology for estimating the economic dimension of these activities will be consistent with theguidelines established by Eurostat," it added.

The move may add up to 2 per cent to Italy's GDP, European Union's statistical service, Eurostat, earlierpredicted. This should bring the country’s new government under Prime Minister Matteo Renzi closer to itsgoal - reaching strong growth and lowering the public debt, which the EU says is now “the major challenge”.

The change in methodology init ially comes f rom the EU, which back in January, set new rules f orcing itsmember-states to track the value of all activit ies that produce income, including criminal activit ies 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 iguref or prostitution (to be included under "services") be calculated f rom approximating the "supply" side and thedrug trade f rom the "demand" side.

Italy’s Istat admits that calculating such income will be “very difficult for the obvious reason as these illegalactivities are not reported.”

Last t ime Italy calculated the size of “grey of businesses” that do not pay taxes was in 2008, when it wassaid 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 newmethod back in January, when Eurostat proposed it. By including illegal activit ies, Spain expects to addabout €10 billion to GDP in 2014.

Among other countries that turned to the EU method is Britain, where drugs and prostitution is expected toadd 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 shadoweconomy, which is notably huge in the periphery, the impact might be less welcome once it starts factoring intotheir share of the EU budget,” Raoul Ruparel, head of economic research at the Open Europe think-tankwas cited by the Times back in February.

In 2013, Italy’s public debt rose to 2.07 trillion euros ($2.84 trillion) or 132.6 percent of gross domesticproduct, 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”, 2005–2014. All rights reserved.