VietNamNet Bridge – Pham The Anh, from the National Economics University’s Faculty of Economics, speaks to Tuổi trẻ (Youth) newspaper about the role of the unobserved economy in the national economy.

What do you think about the General Statistics Department’s proposal to launch a project on unobserved economy statistics in Vietnam?

It is a good idea. If we want to know the health of an economy in a certain period of time, we must have a tool to measure it. And the most common tool nowadays is to measure the GDP. If we don’t know the actual health of the country’s economy, for sure we can’t come up with appropriate policies to manage and regulate the national economy.

GDP statistics are of great importance to the national economy. When people talk about the GDP statistics, they often refer to two groups of statistics – formal and informal statistics.

As far as I know, this proposal has just been approved and work has just started. According to the proposal, there are five elements in the unobserved economic activities, such as underground economic activities; illegal economic activities; informal economic activities which have not been observed; self-reliance household economic activities and missing economic activities.

There are two important elements in a statistics mission: First, only economic activities having created goods and services in the unobserved economy should be registered into the GDP.

Second, it is important to think twice what activities should be included in the course of calculating the GDP. That means not all activities generating goods or services should be included. We have to follow the international norms and Vietnamese laws in calculating the GDP.

What tool should we use to measure the non-observed economy?

It is very difficult to measure the non-observed economy. That’s why, what we could do is to come up with our estimation or projection only.

In real life, there are many ways to measure the non-observed economy. But what measures are used, they only give us projected results.

How should we do to calculate the scale of the unobserved economy?

I don’t have an answer to this question. However, according to results of international research in developed nations, the scope of the unobserved economy is around 2-3 per cent. However, that of the emerging economy, the figure is between 20-30 per cent.

According to the Statistics Office, Vietnam will include the performance of the unobserved economy in the country’s GDP. Is that right?

As I have mentioned above, the most important objective to include the performance of the unobserved economy in the country’s GDP is to understand the health of the national economy. From that we can come up with good decisions/policies to improve our State management, particularly in areas we haven’t done properly. That’s why in my opinion, the plan to include the performance of the unobserved economy in the country’s GDP helps the Government come up with better management policy for the national economy.

When we calculated the GDP, not all economic activities from the unobserved economy are included. It means that not all unobserved economy activities have to pay income tax.

What I want to emphasise is the proposal to include the performance of the unobserved economy into the country’s GDP has a big significance. So we should do it. Its key objective is to help us understand the health of the national economy in order to come up with better management toward activities which have not yet been identified comprehensively.

What I want to say again is that whatever the results are, they only serve as references for us to refer to, not for the purpose of increasing our country’s public debt. 

Source: VNS