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Decrease in shadow economy share may become driver of EEU countries’ economy

«A decrease in the share of the shadow sector may become a potential driver of higher economic growth in the countries of the Eurasian Economic Union,» the Eurasian Development Bank (EDB) macroeconomic review says.

The first half of 2018 clearly demonstrated the significance of global risks. Strengthening of the trade confrontation between the United States, the European Union and China creates significant risks for the dynamics of the world growth. This entails additional risks associated with a possible correction of energy sources prices for EDB countries.

In addition to foreign economic risks, the challenge for the EDB countries is the exhaustion of former growth drivers and the need to search for new reserves to boost the economy.

According to the IMF, the share of the shadow economy is 32 percent of GDP in Kazakhstan, 30.2 percent — in Kyrgyzstan, 32.4 percent — in Belarus, 37.8 percent — in Tajikistan, 36 percent — in Armenia and 33.7 percent — in Russia.

According to EDB experts, the level of shadow economy in countries is high, but now there are all prerequisites for its reduction.

«Reduction in the share of the shadow sector will help to stabilize budget revenues, distribute revenues evenly, and become an important factor in improving the investment climate and economic dynamics in general. In conditions of increasing global risks, reliance on intraeconomic growth engines is becoming increasingly important for the EDB countries. It is desirable to implement transformations for improvement of the economic growth in a relatively favorable foreign trade environment,» said EDB Chief Economist Yaroslav Lissovolik.