Shadow Economy Share at 20% of GDP ({{commentsTotal}})

Share of shadow economy in GDP in Latvia, Lithuania and Estonia
Share of shadow economy in GDP in Latvia, Lithuania and Estonia Source: Graph by ERR

A recent study by banking giant SEB and the Stockholm School of Economics in Riga found that 20 percent of Estonia's economy lies in the shadow zone, where activities are hidden to avoid taxes.

The figure for in 2012 was 19.2 percent, having remained unchanged since 2009, ETV reported on Friday.

The corresponding figures for the other two Baltic states were also around 20 percent, with the biggest changes happening in Latvia, where the share decreased from 36.7 percent in 2009 to 21.1 percent last year.

“The shadow economy is particularly high in the construction industry in Estonia. [...] The good news is that the shadow economy in the construction business is usually high when countries are developing and when the construction business is developing. So we can probably see a good pace of development for Estonia in the coming years,” said Arnis Sauka, an assistant professor at the university.

Sauka said that a third of Estonia's construction industry is not paying tax, up from around 25 percent in 2011.

Ruta Arumäe, an economic analyst at the bank, said that 2012 statistics show that building volumes have skyrocketed, but employment and salaries have stayed at the same level.

Around 10 percent of the economy of Finland and Sweden is underground, while the EU average is 15 percent.