Spain’s sexy $15 billion stimulus

Spain’s National Statistics Institute has included estimates of illicit activities in its GDP estimates for the first time, in accordance with EU norms. Source: News Limited
Trade in sex and drugs boosted Spain’s economic output by nearly $14.5 billion in a year, new official data revealed on Thursday.
The figures came in a report by Spain’s National Statistics Institute which for the first time applied EU norms requiring illicit activities to be counted in estimates of gross domestic product (GDP).
The institute estimated that in 2010, illicit activities, principally prostitution and drug transactions, but also tobacco smuggling and gambling, accounted for 0.87 per cent of the economy overall — equivalent to $13.63 billion.
Once production was recalculated using the new norms, Spain’s GDP in 2013 was more than $37.71 billion or 2.56 per cent higher than previously estimated -- $1.52 trillion overall, the institute said.
That new figure included illegal activity but also other legal sources of income that were previously excluded from the calculation, such as military assets and research investment.
The institute said it consulted “academic and scientific studies” and official reports and surveys to estimate income from illegal activities, in line with the standards set by the EU statistics body Eurostat.
Eurostat ordered countries to provide data on lucrative activities such as prostitution and drug-dealing on the grounds that they were a trade carried out willingly by participants.
Some countries rejected Eurostat’s request. France refused to provide data on prostitution, arguing that it was not necessarily carried out willingly. Sweden, where paying for sex is a crime, also refused.
The institute estimated that in 2010, illicit activities — principally prostitution and drug transactions — accounted for around $13.63 billion. Source: Supplied
In Spain, “the government has no problem doing this, technical or otherwise,” said an official in the economy ministry who asked not to be named.
“It is simply a matter of applying a decision by Eurostat, which was made to harmonise calculation methods” across EU countries, the official told AFP.
The Spanish tax-collectors’ union Gestha contested the state statistics institute’s method of estimating the income from illegal activities, however.
“These figures are a form of window-dressing that will enable the government to present better figures for the national deficit and debt,” said Carlos Cruzado, Gestha’s chairman.
Gestha has estimated that the black economy accounted for just under a quarter of Spanish GDP in 2012.
Italy on Monday published its own revised GDP figure, which rose by 3.8 per cent when the new norms were applied.
Britain has estimated that counting illegal activities could add $17.84 billion to its production, just below one per cent of its GDP for 2013.
Gestha has estimated that the black economy accounted for just under a quarter of Spanish GDP in 2012.
Spain emerged from recession in mid-2013. The government has said it is likely to raise its growth forecast to 1.5 per cent for 2014 and two per cent for next year.
After five years of crisis sparked by the bursting of a construction bubble in 2008, Spain’s unemployment rate is still close to 25 per cent.

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