Uzbekistan's Informal Sector Accounts for More Than a Third of the Nation's Annual Gross Domestic Product
Uzbekistan's economy expanded by an estimated 6.5% in 2024, as suggested by the Presidential Statistical Agency's annual report. The growth was partly driven by the shadow economy, which accounted for more than a third of the nation's GDP.
Preliminary estimates indicate that Uzbekistan's total GDP for 2024 reached approximately 1.45 quadrillion soum, or around USD $115 billion. By dissecting economic activity across various sectors, the report revealed that the industry, trade, and service sectors collectively contributed the majority of the GDP.
However, in an unusual move, the report delved into the role of the unobserved economy, estimating that the shadow economy generated approximately 505.7 trillion soums' worth (USD $39 billion) of goods and services during the year, representing around a 34% share of the overall GDP.
Shadow economic activities were particularly prominent in the agricultural, forestry, and fishery sectors, contributing almost two-thirds of the GDP in these areas. Approximately 40% of economic activity in the construction and service sectors also occurred in the shadows.
The report defined the unobserved economy as economic activities not fully or partially covered by regular statistical observations, necessitating indirect methods to generate estimates. It classified the unobserved economic activity into two categories: the informal economy, which involves activities related to the production of goods and services carried out by households or individuals without registration, and the shadow economy, which comprises activities not prohibited by law but intentionally hidden from government authorities to evade taxes.
Uzbekistan's shadow economy can be attributed to regulatory complexity, high taxes on formal businesses, slow adoption of digital payment systems, weak governance, and ongoing economic development. These factors result in underreporting of actual economic output, reduced government revenue, and complications for economic planning and policymaking.
While official GDP figures may underestimate the true economic activity, the shadow economy's value is not captured in these statistics. A large informal sector also limits public investment in infrastructure and social services, distorts the economic picture, and encourages policy distortions and planning challenges.
In comparison with regional trends, Central Asia reported robust output growth for 2024, partially reflecting both formal and informal economic expansion. In low-income countries globally, the shadow economy can represent over 40% of GDP, and while Uzbekistan is above average in development for its region, its shadow economy is likely substantial, though less than the highest-impact countries.
The shadow economy's substantial contribution to Uzbekistan's GDP, estimated at around USD $39 billion in 2024, highlights the significant impact it has on the nation's economy. This unobserved economic activity, largely due to regulatory complexity, high taxes, and slow adoption of digital payment systems, complicates economic planning and policymaking by underreporting the actual economic output and reducing government revenue.
