ECONOMY

Cyprus’s black market is worth 10 pct of GDP

Nicosia (AFP) – Cyprus’s black market economy is worth more than an estimated 486 million pounds (832 million euros) annually, representing 9.17 percent of its gross domestic product (GDP), said a study leaked yesterday. For every 100 pounds produced, 10 pounds is black money, said the report, carried out by the communist party AKEL – the largest in the governing coalition. In the first study of its kind, leaked by the Politis newspaper, the biggest money spinners in the island’s illegal economy are drugs, worth 136 million pounds each year, and prostitution, worth 40 million pounds. The other main contributors are unlicensed gambling, worth 18 million pounds, and cigarette smuggling, worth 9.2 million pounds, said the AKEL research center. Moreover, the «undeclared economy,» such as tax avoidance, is said to cheat the State of about 126 million pounds, while the «unofficial economy» of street trading and home-based enterprise is estimated to have an annual turnover 138.4 million pounds. According to the study, Cyprus is second from last out of the 10 states making up the next wave of EU enlargement in May 2004. Only Slovenia was deemed to have a smaller black market economy, of 5 percent of GDP. Lithuania was put at the top of the illegal pile with underground activity allegedly representing an estimated 21 percent of GDP. Cyprus also compares favorably to current EU member countries Greece, where the black economy is worth 29 to 35 percent of GDP, and Italy, another hive of illicit activity with a shadow economy of 20 to 26 percent of GDP, the report said. «The study shows that there is a problem with drugs and prostitution and we should be concerned, even if we do fare better than our Mediterranean neighbors,» one of the compilers of the study, Stavros Evagoras, told state television. Researchers said that combating the island’s black market economy would make a huge dent in the government’s fiscal deficit of 350 million pounds.