The share of shadow operations in Ukraine to 2018, amounted to 23.8% of GDP, or 846 billion, according to preliminary results of a study by Ernst & Young with the support of Mastercard, published by the National Bank of Ukraine (NBU).

“According to the study of the Ukrainian economy 846 billion, or 23.8% of official GDP for the year 2018 is in the shade, including 19.7% of GDP (702 billion) is the cash shadow economy, 4.1% of GDP (144 billion), the home production of goods for own final use, i.e. non-monetary shadow economy”, – said the NBU on Monday.

According to the study, 26.2% of “cash shadow economy” – it is “investigating the shadow economy,” where the initiators of the cash settlement are the seller and the buyer. The remaining 73.8 per cent of the total volume of Ukrainian shadow economy (14.4% of GDP, or 512 billion) – “passive shadow economy”, where the initiator of the corresponding calculation is the seller.

The Central Bank noted that the study by Ernst & Young also provides a list of potential measures to reduce “passive shadow economy” and stimulating the development of cashless payments. So, according to experts, the decline in the share of the shadow economy may positively influence the transition to the implementation of social payments exclusively in the form of cash, the introduction of tax incentives, install trade POS-terminals with small and medium-sized enterprises (SMEs), as well as additional incentives for merchants and consumers to cashless payments.

The Central Bank added that according to Mastercard, only 38% of SMEs in Ukraine provide clients with the opportunity of payment for goods and services on cashless basis.

According to the national Bank, research undertaken in the framework of the Memorandum on cooperation of Ernst & Young and the Ministry of economic development, trade and agriculture of Ukraine, the national Bank and the State statistics service of Ukraine (GIS).

The NBU clarifies that Ernst & Young conducted a similar study in 33 countries, including the Czech Republic, Poland, Slovenia, Slovakia, Croatia, Bulgaria, Bosnia and Herzegovina, Serbia and others. Historically, the level of shadow economy among these countries ranged from 10.1% to 26.9% of GDP.

“Studies in European countries confirm that increasing the share of non-cash payments at 100% helps to reduce the level of shadow economy by 0.6 to 3.7% of GDP, while government revenues increase by 0.1% and 0.8% of the GDP of the studied countries,” said the regulator.

As reported, the development Strategy of the financial sector involves reducing the share of shadow economy from 30% of GDP (according to the calculations of Ministry of economic development for 2018) to no more than 20% of GDP until 2025.