Quantifying informal economic sector just for reference: economists

  • ngày 2018/02/08

The General Statistics Office is working on a plan to assess the value created by the informal economic sector as per the government’s request.

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The informal economic sector`s valuation is 30 percent

However, economists believe that it would be better not to count the informal economic sector when calculating GDP.

According to Vo Tri Thanh, former deputy head of the Central Institute of Economic Management (CIEM), the informal economic sector’s valuation was 10 percent of GDP in 1990s. Ten years ago, several institutions estimated that the value of the sector was equal to 30-35 percent of GDP.

PM Nguyen Xuan Phuc believes that if Vietnam counts the value created by the informal economic sector, the real GDP of Vietnam would be much higher than the figure reported. 

The informal economic sector’s valuation was 10 percent of GDP in 1990s. Ten years ago, several institutions estimated that the value of the sector was equal to 30-35 percent of GDP.

If so, the government can lift the public debt ceiling and have more money for investment and development.

Head of the VCCI’s (Vietnam Chamber of Commerce & Industry) Legal Department Dau Anh Tuan cited a report of IFC (International Finance Corporation) released in 2003 as saying that it is the over-regulation increases informal economic activities. For example, for every 2 days more businesses have to spend to observe the rules, the number of official labor contracts decreases by 1 percent.

Economists do not think the value should be counted when calculating GDP.

VEPR’s (Vietnam Institute for Economic and Policy Research) director Nguyen Duc Thanh said the government needs to thoroughly understand the informal economic sector in order to create appropriate economic development strategies. However, it should not count the sector when calculating GDP.

If the value from the informal economic sector is assessed, Vietnam’s total GDP would increase, thus leading to adjustments of many indexes, while budget overspending and the ratio of public debt to GDP will decrease.

“Some European countries once thought of counting the value generated by the informal economic sector to ‘embellish’ their reports about economic growth and help reduce the debts and trade deficit. However, we should quantify the informal economic sector just for reference,” Thanh said.

GSO’s general director Nguyen Bich Lam said public debt would not increase. Once the value is added, GDP size will increase, but the growth rate won’t be affected much.

Le Dang Doanh, a renowned economist, said the informal economic sector exists in every economy, though the sizes vary. The best way to control the informal economic sector is the application of a transparent e-government.

Kim Chi

Source: VietNamNet

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