Study: Brazil’s underground economy equivalent to 16.2 pct of GDP

Last Updated on Thursday, 13 November 2014, 21:33 by GxMedia

Rio de Janeiro, Nov 13 (EFE).- Brazil’s underground economy will shrink slightly this year to 16.2 percent of gross domestic product, down from 16.3 percent in 2013, according to a study released by the Getulio Vargas Foundation, or FGV, a private higher education institution.

Economic activities that are not legally recognized will amount to 833 billion reais (some $326.7 billion) this year, according to data from the so-called Underground Economy Index, which is calculated by the FGV’s Brazilian Institute of Economics, or IBRE, and the Brazilian Institute for Ethical Competition.

Last year, the underground economy was equivalent to 16.3 percent of Brazil’s GDP, which amounted to 4.84 trillion reais (around $1.89 trillion).

The underground economy has decreased as a percentage of Brazil’s gross domestic product every year since 2003, when it was equal to 21 percent of GDP, but this year’s figures point to a slower reduction.

Economist Fernando de Holanda Filho, an IBRE researcher, said these results are attributable to the scant growth of Brazil’s formal sector this year.

“The economy is decelerating and so is credit, and employment has grown very little. That has a direct impact on the formal sector, which is naturally declining and ceding ground to informality,” he was quoted as saying in the study, which was released on Wednesday.

The underground economy, which includes all output not reported to the government, covers both informal and illegal economic activity.

The informal sector encompasses the production and exchange of goods and services that are not illegal in themselves; however, all or part of that activity is deliberately concealed from the tax authorities.

The illegal economy, meanwhile, includes activities such as prostitution and weapons and drug-trafficking that are against the law.