Non-observed economy in national accounts - Years 2020-2023

Non-observed economy over 217bn euro in 2023, 10.2% as a percentage of GDP

Non-observed economy over 217bn euro in 2023, 10.2% as a percentage of GDP In 2023, non-observed economy increases by 15.1bn euro, + 7.5% with respect to 2022 (+7.2% the growth rate of GDP at current prices). Underground economy is worth about 198bn euro, +14.9bn euro compared to 2022, while illegal activities reach almost 20bn euro. Unregistered FTEs are 3,132mln, increasing by about 145k units with respect to 2022.

Non-Observed Economy (NOE) refers to economic activities that cannot be directly observed and mainly includes the underground and illegal economy. Underground economy is composed of: (1) underreporting of value added, i.e., the value added that is concealed by intentional mis-declaration of turnover and/or costs; (2) the value added generated by the employment of un-registered workers; (3) a residual component including tips, undeclared rents paid to households and the effect of the balancing between estimates of supply and demand (which includes both purely statistical phenomena and underground activities that are not captured by standard estimation methods).

Illegal economy includes both activities involving the production and sell of goods and services that are outside the rule of law, and activities involving legal goods and services but that are carried out without proper authorization. For EU countries, only drugs trafficking, prostitution services and smuggling of tobacco and alcohol have to be included within the National Accounts framework.

In 2023, the value added generated by NOE, i.e., the sum of underground economy and illegal activities, is worth 217.5bn euro, increasing by 7.5% with respect to 2022 (202.4bn euro). The incidence of NOE on GDP, which shows a growth rate of 7.2% at current price compared to the preceding year, slightly increases to 10.2%, from 10.1% registered in 2022.

The general dynamic of NOE is driven by the growth of its main components. In particular, the value added connected with underreporting increases by 6.6% (+6.7bn euro), while the value added generated by the employment of unregistered workers raises by 11.3% (+7.8bn euro) with respect to 2022. The contribution of the other components of NOE are less relevant: tips and un-registered rents increase by 3.8% (+0.5bn euro) compared to 2022, while illegal activities grow by 1.0% (+0.2bn euro).

The larger growth of the value added from un-registered workers compared to the other components entails a moderate re-composition of their relative contribution to the whole amount of NOE. In particular, the weight of the value added from unregistered workers is 35.5%, an analogous level compared to 2021 (35.6%), higher than the one registered in 2022 (34.3%). Conversely, the weight of the value added generated by underreporting decreases to 49.7% in 2023 from 50.1% in 2022 (it was 49.3% in 2021). The other components of underground economy have an impact of 5.6% on the whole amount of NOE (5.8% in 2022 and 5.2% in 2021). Finally, the progressive reduction in the impact of the illegal economy, which began in 2020 (when it was at 10.5%), still continues: 9.2% in 2023, 9.8 in 2022, 10.1% in 2021.