Original scientific paper

Maastricht Criteria and the Inclusion of Underground Economy - the Case of Croatia

Željko Lovrinčević
Zdravko Marić
Davor Mikulić

Abstract

European Union has introduced an explicit obligation for all member states that the official GDP data need to include the estimation of the underground economy, resulting from statistical or economic reasons. For this purpose, the so-called Eurostat Exhaustiveness programme has been developed for the group of candidate countries, ten of which have become full members as of the 1st of May 2004. In line with the results of this programme, the new EU members include the correction for the value of the underground economy into their official GDP figure. With the inclusion of underground economy, the consequent value of Croatian GDP per capita, measured according to the purchasing power parity, reduces the gap in comparison to the EU-25. Furthermore, the proportion of total expenditures in GDP of the general government sector is reduced as well, which places Croatia below the NMS-8 country average. In terms of the Maastricht convergence criteria, the underground economy inclusion procedure does not affect the fact that the criteria are not met. The inclusion of the underground economy influences two indicators: proportion of the government sector deficit in GDP and the proportion of the public debt in GDP. The inclusion of the underground economy does not influence on fulfilling the criteria concerning the government sector deficit. The criteria concerning the size of public debt are fulfilled by Croatia even without the inclusion of the underground economy. Inflation criteria and the size of long-term interest rates criteria are not directly linked to the GDP value.

Keywords

Maastricht criteria; underground economy; Croatia

Hrčak ID:

11653

URI

https://hrcak.srce.hr/11653

Publication date:

5.4.2007.

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