Study: Gray Economy Strong in Bulgaria and Romania

According to a study by the Bulgarian National Center Business to the Rules, an informal or “gray” economy accounts for nearly a third of the goods and services produced in Bulgaria and Romania. The two have the largest gray economies in the European Union (EU). The study was done as a part of a Restriction and Prevention of Informal Economy project funded by the EU. 

Although the informal economy in Bulgaria began shrinking in 2011, as businesses adhered more closely to the law, this is true only in some sectors such as retail. The service sector has changed less. Construction, tourism, and health are at the forefront of Bulgaria’s grey economy. In these areas, the study says, economic activity outside state regulation can be as high as 50 or 60 percent. Experts blame bribery for making secret transactions something of the norm in the health care system.

Forms of corruption such as tax fraud and concealment of income are common at the interface between services and end customers.

The study observed a decrease in the collection of Value Added Tax (VAT), and in trade between Bulgaria and other EU countries. Public tender bids remain a problem, especially when it comes to formulation of competition criteria and selection of winning bidders.

According to European Commission data, the gray economy in EU countries in 2012 averages 19.6 percent of their Gross Domestic Product. At the low is Switzerland (7.8 percent) and Austria (7.9 percent).