Illegal and undeclared economic activity was estimated at more than €320 million last year but experts believe the figure is actually significantly higher.

A spokeswoman for the National Statistics Office told the Times of Malta the figure had grown by more than €40 million in just 12 months.

The island’s undeclared economic activity was estimated to have exceeded €280 million in 2016, though experts believe this is the tip of the iceberg.

The NSO said economic activity classified as “the non-observed economy” was estimated to be about 3 per cent of the country’s GDP, quickly adding the real figure was actually likely to be far greater but could not be calculated.

The statistics office came to the €323 million figure on the back of new formulas introduced as part of an EU-wide review of national accounting systems implemented in 2013. The formulas were eventually rolled out in Malta.

Estimates included those who were deliberately misreporting their earnings

Estimates on irregular activities and the impact on the economy were made by the NSO in the past but were never published with the national accounts.

The spokeswoman said the estimates included the presumed economic activity by those deliberately not registering their production, classified as “underground operations”, or others registered as “illegal”.

The figure also included people not required to register their economic activity because of loopholes and those who were deliberately misreporting their earnings for various reasons.

“The non-observed economy is not a direct estimate of the shadow economy,” the spokeswoman pointed out.

The EU-wide review of the national statistics gathering system also added activities like drugs and prostitution to GDP figures. In 2014, the figure was estimated to be about €20 million, rising by €4 million the following year. The NSO spokeswoman said the figure stood at about €26 million at present.

“GDP is about calculating transactions, when funds are exchanged between two or more consenting parties for a product or service. So, including the figures on drugs and prostitution gives a better picture of the economy in terms of legal and illegal transactions,” the NSO said when the figure was first added to the national accounting system.

According to details emerging from the new system, less than 1 per cent of the population was engaged in the prostitution industry.

Figures regarding people involved in the importation and sale of narcotics remain unavailable. Estimates in relation to narcotics are generally more reliable because they are based on a number of studies.

However, when it comes to prostitution, the NSO said data sources were much more limited and Maltese estimates were still being derived by applying statistics from other European countries to local variables such as population and demographics.

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