Why is this important
One-third of GDP ($36 billion) operates outside of full state control — these are lost taxes, social contributions, and statistical distortions. The growth of the informal sector to 25.6% of GDP indicates the expansion of self-employment (taxi drivers, freelancers, small businesses). A decrease in the shadow sector (7.7%) is a positive trend in business legalization. Agriculture (69.4% of the uncontrolled economy) is a structural problem of the industry.
What happened
- GDP for 9 months — 1.3 sq. sum ($108.73 billion), growth of 7.6%;
- Unobserved economy — 433.67 trillion soums ($36.17 billion), 33.3% of GDP;
- Informal sector — 333.82 trillion (GDP 25.6%), growth in share;
- Shadow sector — 99.85 trillion (7.7% of GDP), decrease in share;
- The leader in the unobserved economy is agriculture (69.4%).
Structure of an unobservable economy
Unobserved economy = informal sector + shadow sector.
Informal sector (25.6% of GDP): activities of households and individuals not registered as legal entities: self-employed (taxi drivers, freelancers), small-scale trade in markets, home-based production (crafts, handicrafts).
Shadow sector (7.7% of GDP): hidden activities of registered enterprises: understatement of revenue, gray salaries, tax evasion.
Dynamics
- In the first half of the year: unobserved economy — 32.9% of GDP;
- 9 months: 33.3% of GDP (+0.4 p.p.).
Informal sector: the share has increased (accurate data for the first half of the year are not provided, but growth has been recorded).
Shadow sector: the share decreased compared to the first half of the year — a positive trend in legalization.
Analysis
Growth to 33.3% of GDP. One-third of the economy operates outside the full control of the state. This means:
- Lost taxes: the state does not receive tens of billions of soums in revenue;
- Lack of social protection: informal sector employees do not pay to the Pension Fund, do not have medical insurance;
- False statistics: real GDP and employment are higher than official figures.
Informal sector (25.6%): The growth of the share indicates the expansion of self-employment and small business. Reasons:
- Simplicity of working without registration (Yandex taxi drivers, freelancers);
- High taxes and complex reporting for small businesses;
- Lack of formal jobs.
Shadow sector (7.7%): a decrease in share is a positive trend. Reasons:
- Strengthening tax control (online cash registers, electronic invoices);
- Simplification of tax reporting for businesses;
- Increased trust in the state and legalization of business.
Agriculture (69.4%): Almost 70% of the sector is an uncontrolled economy. This is a structural issue:
- Millions of small farmers work without registration;
- Households grow products for themselves and sell them in markets;
- Lack of formal contracts, taxes, and social contributions.
Services (36.2%): a high share of the unobserved economy is associated with small private services: taxi, repair, tutoring, beauty, freelancing.
Construction (35%): Construction boom (+33% sector growth) attracts informal workers: manual laborers, unregistered brigades, gray salaries.
Industry (10.2%): low share of uncontrolled economy — industry is more formalized, as large enterprises operate with strict control.
Context
$36 billion of uncontrolled economy is a huge amount comparable to the country’s annual budget ($40+ billion). These are lost taxes: with an average tax burden of 15-20%, the state does not receive $5-7 billion annually.
Comparison with other countries: developed countries have an unobserved economy of 10-20% of GDP, developing countries — 30-50%. Uzbekistan (33.3%) is in the middle zone, but the goal is to reduce it to 20-25%.
Control measures:
- Simplification of business registration and tax reporting;
- Online cash registers and electronic invoices for revenue control;
- Tax benefits for small businesses and self-employed people;
- Increasing trust in the state through transparency and combating corruption.
