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Policy brief

Hidden Economy in Macedonia Policy Brief 1: The Economics of Blurs and Shadows – The Hidden Economy in Macedonia

The Center for the Study of Democracy, in collaboration with the Center for Research and Policy Making (CRPM) elaborated a series of policy briefs analyzing the hidden economy in Macedonia. The topics encompass the issues of countering undeclared labour, tax evasion and fraud, media reporting on hidden economy and corruption, etc.

The current policy brief provides an overview of the hidden economy in Macedonia, including some of its main causes and consequences. At the same time, it offers a macroeconomic overview of the characteristics considered to favor the prevalence of the hidden economy, while outlining the basic definitions and different hidden economy measurement methods. Furthermore, it reviews the latest policy developments in Macedonia in the area of hidden economy and delivers an outline of where this phenomenon is headed and what measures are, and should be taken, to tackle it.

The authors underline several key points:

  • According to the research being done on the issue of hidden economy, its share in Macedonia, depending on the measurement method used, ranges from 24% to 47% of GDP with a tendency to decrease.
  • The decreasing, but still large unemployment rate (28.4% as of Q2 2014), as one of the most important factors that give rise to hidden economic activities and practices, indicates a crossover from the informal to the formal sector.
  • The indicators of non-observed economy (NOE) and observed informal employment by the SSO indicate a tendency of decreasing hidden economy and increasing formalization of labor.
  • Attracting FDIs through improving the business environment, increasing the capacity of the self- employment program of the Employment Agency, and reforming the inspectorates will remain some of the most crucial factors in encouraging the formalization process of labor and businesses and thus decreasing hidden economic activities.

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