Author: Alexandre Rodrigues

Source: Estadão - SP - ECONOMY - 01/12/2009

ALEXANDRE RODRIGUES - State Agency

RIO - The tax relief of the government's incentive policy contributed to the reduction of the growth rate of the informal economy in relation to the Gross Domestic Product (GDP). The survey of the Underground Economy Index, carried out by the Brazilian Institute of Economics of the Getúlio Vargas Foundation (Ibre / FGV) in partnership with the Brazilian Institute of Competition Ethics (ETCO), released today, showed that the evolution of the informal economy was only 2 % between December 2008 and June 2009, almost one percentage point above the variation of accumulated GDP in the first half (1,1%).

The calculation of the variation of 1,1% was made by FGV researcher Fernando de Holanda Barbosa Filho, since the IBGE does not calculate the GDP variation in the semester compared to the immediately previous semester since there is no seasonal adjustment for this indicator. According to the researcher, this difference was above 20 percentage points in the second half of 2008.

According to data presented by FGV, in the period between June 2008 and June 2009, the so-called underground (or informal) economy grew by 22,6 percentage points in relation to the GDP expansion in the period.

He explained that, as it is not affected by the credit crunch, the informal economy maintained its growth pace until the beginning of this year, when it started to follow the official economy.

According to the economist, the reduction of the tax burden of some products as an initiative to combat the crisis was one of the main factors for the deceleration of informality. However, in the analysis of FGV technicians, the trend is for the underground economy to grow again with the end of tax incentives and the consequent increase in the tax burden. Another growth factor that influences the informal economy is the level of economic activity, which provides an increase in demand in the formal and informal economy.