## BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline

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### A. Introduction — Purpose, relationship to past standards, and core messages
- Purpose: Provide revisions for the revised SNA chapter and the new BPM chapter on informal activities; SNA and BPM editors will coordinate to include only issues relevant to external sector statistics (BPM) or national accounts (SNA).
- Relationship to past standards:
  - Represents a significant revision of 2008 SNA Chapter 25.
  - Incorporates the latest recommendations from the International Labour Organization on informal productive activities.
  - Since 2018, the ILO has developed a comprehensive and improved framework summarized in this chapter.
  - ILO proposed new standards scheduled to be discussed and adopted at the 21st International Conference of Labour Statisticians in October 2023 (see report for the Tripartite Meeting of Experts in Labour Statistics, Geneva, 7–10 February 2023).
- Core messages:
  - Informal productive activities provide employment and income to many who might otherwise be unemployed and tend to increase vulnerability to negative economic shocks, with consequences for inequality and poverty.
  - Measuring the informal economy is important for designing, implementing, monitoring, and analyzing macroeconomic and social policies.
  - Measurement framework aims to ensure consistent measures of informal production and informal labour inputs to inform policy decisions that may decrease vulnerability of informal workers and enterprises.
- Definitions and scope introduced:
  - The informal economy: all informal productive activities carried out by workers or economic units within the general production boundary.
  - Informal productive activities: productive activities carried out by persons or economic units that are – in law or in practice – not covered by formal arrangements.
  - Informal sector: household unincorporated market enterprises and associated labour input not formally recognized by government authorities because not registered for tax or similar purposes.
  - Distinction from non-observed economy: conceptually distinct; non-observed economy is a pragmatic term for activities not captured in regular statistical enquiries and overlaps with but differs from the informal economy.

### B. Framework for the informal economy — conceptual structure and assignment rules
- Overarching concept: all informal productive activities carried out by workers or economic units within the general production boundary.
- Key definitional points:
  - Perspective split: informality from the perspective of workers and the perspective of economic units.
  - The term “informal sector” retained for household unincorporated market enterprises even though “sector” differs from SNA usage of institutional grouping.
  - “Informal work” refers to informal productive activities carried out by persons; “informal employment” refers to informal work intended to generate pay or profit.
- Assignment of economic units:
  - All non-household economic units (corporations, general government, and NPISHs) assigned to the formal sector as they are formally recognized producers.
  - Households assigned to the formal sector if production is through a household unincorporated market enterprise registered for tax or similar purposes.
  - Households assigned to the informal sector if production mainly intended for the market is undertaken through a household unincorporated market enterprise not formally recognized by government authorities because not registered for tax or similar purposes.
  - Households producing goods and services mainly intended for own final use are assigned to the household own-use production sector, included in the informal economy but not part of the informal sector.
- Additional framework features and practical issues:
  - Household unincorporated market enterprises often lack complete accounts and may not allow separation of household consumer vs. producer assets; a second step identifies which productive activities and labour inputs are informal.
  - Production/international trade by formal sector economic units (including undeclared and underdeclared production/trade) is not part of the informal economy but may be accounted as non-observed production activity / international trade; formal units can use informal labour inputs which are part of the informal economy.
  - Informal sector specifics:
    - Informal household unincorporated market enterprises may be called informal enterprises.
    - The informal sector includes agricultural production of informal enterprises.
    - Enterprise size is not a criterion to classify household unincorporated market enterprises as informal.
    - A single household can operate multiple informal enterprises; identify as separate informal enterprises if feasible.
    - All labour inputs in the informal sector are informal.
  - Household own-use production sector:
    - Includes households producing goods and services mainly for own final consumption, production of informal or temporary NPISHs, and direct volunteer work.
    - Extends beyond the SNA production boundary by including production of services by households for own use, direct volunteering, and services produced by informal NPISHs.
    - Production of informal or temporary NPISHs and direct volunteer work is always informal.
    - Housing services of owner-occupiers are by convention excluded from the informal economy.
    - Household own-use production (other than housing services of owner occupiers, informal or temporary NPISHs, and direct volunteering) undertaken using household members’ labour is mostly informal, though exceptions are possible.
- Illegal activities:
  - Most, but not all, illegal productive activities would be part of the informal economy if informality principles are applied.
  - Production of goods and services whose sale, distribution or possession is forbidden by law are by convention excluded from the informal economy; statistics on informality should be supplemented with measures of such illegal productive activities.
  - Production that is usually legal but becomes illegal when carried out by unauthorized producers should be included in the informal economy.
- Methodological tools: planned incorporation of Boxes 1 and 2 and Figure 1 from the IE 1 Guidance Note providing a tabular framework and decision tree to identify informal productive activities.

### C. Digitalization and informal cross border flows — measurement challenges
- Digitalization:
  - Digitalization has penetrated many aspects of economic activity and raised concerns about mismeasurement.
  - New types of informal economic activities use digital technologies and have created jobs that may be formal or informal.
  - Many of these jobs are dependent contractors (treated in Section D); dependent contractors facilitated by digitalization typically depend on formal enterprises (possibly non-resident) providing digital intermediation services.
  - Household unincorporated market enterprises engaged in such activities should be assigned to the formal or informal sector based on usual criteria.
- Informal cross border flows:
  - Problems in external sector statistics arise when transactions outside scope of regular statistical enquiries are omitted; omissions may relate to informal economy activities or to formal enterprises with formal labour inputs.
  - Example: merchandise trade statistics may not cover shuttle trade undertaken by household unincorporated market enterprises and not captured by customs recording.
  - Framework can be applied to informal cross border transactions in goods (including shuttle trade and smuggling of legitimate goods by informal units), informal services (including tourism services such as room rental and informal restaurants and bars), and remittances transmitted through informal channels.
  - Households may transmit income derived from the informal economy as remittances through formal or informal money transfer channels.
- Illicit financial flows:
  - Distinguish illicit financial flows from cross-border informal economy flows.
  - Four main types of activities generating illicit financial flows: i) tax and commercial activities, ii) illegal markets, iii) corruption, and iv) exploitation-type activities and financing of crime and terrorism.
  - Illicit financial flows can emerge as illicit income generation or illicit income management.
  - Illicit financial flows should be distinguished from illegal transactions; illegal transactions are treated no differently from legal transactions and are included in the balance of payments statistics framework.
  - Not all illicit financial flows are transactions and therefore not all would be recorded in macroeconomic statistics.
  - Flows arising from exploitation-type activities are not transactions and are therefore excluded from the balance of payments statistics.

### D. Informal work — definitions, categories, and special forms
- Structure: Introduce ILO definitions (job/work activity, independent workers, dependent workers, employment for profit, employment for pay) before defining categories of informal employment.
- Categories and criteria:
  - Employers: in informal employment if they operate and own or co-own a household unincorporated market enterprise.
  - Dependent contractors:
    - Own and operate household unincorporated market enterprises and have commercial contractual arrangements (but not employment contracts) to provide goods or services for or through another economic unit; see IE1 GN, para. 50–51 for other conditions.
    - Dependent contractors are in informal employment if they:
      - do not own or co-own a formal economic unit and are not registered for tax and thereby do not have a formal status, or
      - own or co-own a formal economic unit or are registered for tax, and thereby have a formal status but without effective access to formal arrangements intended to reduce the economic risk related to the job.
  - Employees: in informal employment if their employment relationship is not in practice formally recognized by the employer in relation to the legal administrative framework of the country and not associated with effective access to formal arrangements such as labour legislation, social protection, income taxation, or entitlement to employment benefits; includes domestic staff when no formal arrangement exists between employer and employee.
  - Contributing family workers: in informal employment if their job is not in practice formally recognized in relation to the legal administrative framework.
- Additional notes:
  - Include Tables 2 and 3 from the appendix of the ILO’s “Statistics for the informal economy”, showing “informal productive activities by persons in the informal economy” and “informal and formal jobs by status in employment and sector”.
  - Partly informal productive activities in relation to formal jobs: all labour inputs of workers in informal jobs and informal work activities are informal; workers in formal employment can provide informal labour inputs to formal sector units (e.g., when income and hours worked are not declared).
  - Informal forms of work other than employment:
    - Direct volunteering is always informal.
    - Organization-based volunteer work is informal if carried out for an informal NPISH or an informal sector enterprise, or for/through a formal economic unit when the volunteer is not covered by formal arrangements aimed at protecting the worker and regulating the activities.
    - Unpaid trainee work is informal if not effectively covered by formal arrangements aiming to protect and regulate the work.
    - Own-use production work is informal if not effectively covered by formal arrangements that promote, facilitate, protect, and regulate the worker’s actions and functions.
- Drafting coordination: section focuses solely on informal employment and will coordinate with the chapter on labour to avoid duplication by cross-referencing.

### E. The non-observed economy — definition, international accounts, and measurement
- Definition: Extent of economic activity missing from statistical data collections and administrative sources, including some illegal activities; overlaps with but is not identical to the informal economy.
- Non-observed elements in international accounts:
  - International transactions (and possibly positions) missing from statistical data collection and administrative sources constitute non-observed elements of the international accounts.
  - Some omissions may relate to informal economy activities; others may relate to activities outside the scope of the informal economy such as undeclared and underdeclared production and trade by formal units.
  - Merchandise trade statistics of some economies may not cover items traded by formal enterprises.
- Measurement implications:
  - Assembling national accounts, particularly using supply and use frameworks, casts light on missing information including illegal activities; balancing supply and use tables may estimate some non-observed activity but may not capture all of it.
  - Techniques from Measurement of the Non-Observed Economy: A Handbook are useful for measuring both the non-observed economy and some aspects of informal enterprises.

### F. Guidelines, studies and handbooks — sources for compilers
- Purpose: Review and cite various guidelines, studies, and handbooks useful for compilers of informal economy statistics.
- Items indicated for review/citation include:
  - Reports of the BOPCOM Task Force on the Informal Economy.
  - IMF paper, “Measuring the Informal Economy”.
  - ILO reports and guidelines.
  - ICLS resolutions.
  - Conceptual Framework for Statistics on Informal Economy.
- Implementation note: This section will summarize items cited in Annex II of the IE 1 Guidance Note and other relevant resources to inform compilers.

*Draft prepared by Brent Moulton (SNA lead) and Patrick Quill (BPM lead). — BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline. For Global Consultation. IMF Committee on Balance of Payments Statistics.*

### Section 1

### BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline — Section 1

### A. Introduction
- Purpose: Provide revisions for the revised SNA chapter and the new BPM chapter on informal activities; SNA and BPM editors will coordinate to include only issues relevant to external sector statistics (BPM) or national accounts (SNA).
- Relationship to past standards:
  - Represents a significant revision of 2008 SNA Chapter 25.
  - Incorporates the latest recommendations from the International Labour Organization on informal productive activities.
  - Since 2018, the ILO has developed a comprehensive and improved framework summarized in this chapter.
  - ILO proposed new standards scheduled to be discussed and adopted at the 21st International Conference of Labour Statisticians in October 2023 (see related report for the Tripartite Meeting of Experts in Labour Statistics, Geneva, 7–10 February 2023).
- Core messages:
  - Informal productive activities provide employment and income to many who might otherwise be unemployed and tend to increase vulnerability to negative economic shocks, with consequences for inequality and poverty.
  - Measuring the informal economy is important for designing, implementing, monitoring, and analyzing macroeconomic and social policies.
  - Measurement framework aims to ensure consistent measures of informal production and informal labour inputs to inform policy decisions that may decrease vulnerability of informal workers and enterprises.
- Definitions and scope introduced:
  - The informal economy: all informal productive activities carried out by workers or economic units within the general production boundary.
  - Informal productive activities: productive activities carried out by persons or economic units that are – in law or in practice – not covered by formal arrangements.
  - Informal sector: household unincorporated market enterprises and associated labour input not formally recognized by government authorities because not registered for tax or similar purposes.
  - Distinction from non-observed economy: conceptually distinct; non-observed economy is a pragmatic term for activities not captured in regular statistical enquiries and overlaps with but differs from the informal economy.
- Concluding note: Introduction summarizes the structure of the rest of the chapter.

### B. Framework for the informal economy
- Overarching concept: all informal productive activities carried out by workers or economic units within the general production boundary.
- Key definitional points:
  - Perspective split: informality from the perspective of workers and the perspective of economic units.
  - The term “informal sector” retained for household unincorporated market enterprises even though “sector” differs from SNA usage of institutional grouping.
  - “Informal work” refers to informal productive activities carried out by persons; “informal employment” refers to informal work intended to generate pay or profit.
- Assignment of economic units:
  - All non-household economic units (corporations, general government, and NPISHs) assigned to the formal sector as they are formally recognized producers.
  - Households assigned to the formal sector if production is through a household unincorporated market enterprise registered for tax or similar purposes.
  - Households assigned to the informal sector if production mainly intended for the market is undertaken through a household unincorporated market enterprise not formally recognized by government authorities because not registered for tax or similar purposes.
  - Households producing goods and services mainly intended for own final use are assigned to the household own-use production sector, included in the informal economy but not part of the informal sector.
- Additional framework features:
  - Household unincorporated market enterprises often lack complete accounts and may not allow separation of household consumer vs. producer assets; a second step identifies which productive activities and labour inputs are informal.
  - Production/international trade by formal sector economic units (including undeclared and underdeclared production/trade) is not part of the informal economy but may be accounted as non-observed production activity / international trade; formal units can use informal labour inputs which are part of the informal economy.
  - Informal sector specifics:
    - Informal household unincorporated market enterprises may be called informal enterprises.
    - The informal sector includes agricultural production of informal enterprises.
    - Enterprise size is not a criterion to classify household unincorporated market enterprises as informal.
    - A single household can operate multiple informal enterprises; identify as separate informal enterprises if feasible.
    - All labour inputs in the informal sector are informal.
  - Household own-use production sector:
    - Includes households producing goods and services mainly for own final consumption, production of informal or temporary NPISHs, and direct volunteer work.
    - Extends beyond the SNA production boundary by including production of services by households for own use, direct volunteering, and services produced by informal NPISHs.
    - Production of informal or temporary NPISHs and direct volunteer work is always informal.
    - Housing services of owner-occupiers are by convention excluded from the informal economy.
    - Household own-use production (other than housing services of owner occupiers, informal or temporary NPISHs, and direct volunteering) undertaken using household members’ labour is mostly informal, though exceptions are possible; examples illustrate criteria evaluation.
- Illegal activities:
  - Most, but not all, illegal productive activities would be part of the informal economy if informality principles are applied.
  - Production of goods and services whose sale, distribution or possession is forbidden by law are by convention excluded from the informal economy; statistics on informality should be supplemented with measures of such illegal productive activities.
  - Production that is usually legal but becomes illegal when carried out by unauthorized producers should be included in the informal economy.
- Methodological tools: planned incorporation of Boxes 1 and 2 and Figure 1 from the IE 1 Guidance Note providing a tabular framework and decision tree to identify informal productive activities.

### C. Digitalization and informal cross border flows
- Digitalization:
  - Digitalization has penetrated many aspects of economic activity and raised concerns about mismeasurement.
  - New types of informal economic activities use digital technologies and have created jobs that may be formal or informal.
  - Many of these jobs are dependent contractors (treated in Section D); dependent contractors facilitated by digitalization typically depend on formal enterprises (possibly non-resident) providing digital intermediation services.
  - Household unincorporated market enterprises engaged in such activities should be assigned to the formal or informal sector based on usual criteria.
- Informal cross border flows:
  - Discusses problems in external sector statistics when transactions outside scope of regular statistical enquiries are omitted; omissions may relate to informal economy activities or to formal enterprises with formal labour inputs.
  - Example: merchandise trade statistics may not cover shuttle trade undertaken by household unincorporated market enterprises and not captured by customs recording.
  - Framework can be applied to informal cross border transactions in goods (including shuttle trade and smuggling of legitimate goods by informal units), informal services (including tourism services such as room rental and informal restaurants and bars), and remittances transmitted through informal channels.
  - Households may transmit income derived from the informal economy as remittances through formal or informal money transfer channels.
- Illicit financial flows:
  - Distinguish illicit financial flows from cross-border informal economy flows.
  - Four main types of activities generating illicit financial flows: i) tax and commercial activities, ii) illegal markets, iii) corruption, and iv) exploitation-type activities and financing of crime and terrorism.
  - Illicit financial flows can emerge as illicit income generation or illicit income management.
  - Illicit financial flows should be distinguished from illegal transactions; illegal transactions are treated no differently from legal transactions and are included in the balance of payments statistics framework.
  - Not all illicit financial flows are transactions and therefore not all would be recorded in macroeconomic statistics.
  - Flows arising from exploitation-type activities are not transactions and are therefore excluded from the balance of payments statistics.

### D. Informal work
- Structure: Introduce ILO definitions (job/work activity, independent workers, dependent workers, employment for profit, employment for pay) before defining categories of informal employment.
- Categories and criteria:
  - Employers: in informal employment if they operate and own or co-own a household unincorporated market enterprise.
  - Dependent contractors:
    - Own and operate household unincorporated market enterprises and have commercial contractual arrangements (but not employment contracts) to provide goods or services for or through another economic unit; see IE1 GN, para. 50–51 for other conditions.
    - Many new dependent contractor forms are facilitated by digitalization.
    - Dependent contractors are in informal employment if they:
      - do not own or co-own a formal economic unit and are not registered for tax and thereby do not have a formal status, or
      - own or co-own a formal economic unit or are registered for tax, and thereby have a formal status but without effective access to formal arrangements intended to reduce the economic risk related to the job.
  - Employees: in informal employment if their employment relationship is not in practice formally recognized by the employer in relation to the legal administrative framework of the country and not associated with effective access to formal arrangements such as labour legislation, social protection, income taxation, or entitlement to employment benefits; includes domestic staff when no formal arrangement exists between employer and employee.
  - Contributing family workers: in informal employment if their job is not in practice formally recognized in relation to the legal administrative framework.
- Additional notes:
  - Include Tables 2 and 3 from the appendix of the ILO’s “Statistics for the informal economy”, showing “informal productive activities by persons in the informal economy” and “informal and formal jobs by status in employment and sector”.
  - Partly informal productive activities in relation to formal jobs: all labour inputs of workers in informal jobs and informal work activities are informal; workers in formal employment can provide informal labour inputs to formal sector units (e.g., when income and hours worked are not declared).
  - Informal forms of work other than employment:
    - Direct volunteering is always informal.
    - Organization-based volunteer work is informal if carried out for an informal NPISH or an informal sector enterprise, or for/through a formal economic unit when the volunteer is not covered by formal arrangements aimed at protecting the worker and regulating the activities.
    - Unpaid trainee work is informal if not effectively covered by formal arrangements aiming to protect and regulate the work.
    - Own-use production work is informal if not effectively covered by formal arrangements that promote, facilitate, protect, and regulate the worker’s actions and functions.
- Drafting coordination: care will be taken to coordinate with the chapter on labour to avoid duplication by cross-referencing; this section focuses solely on informal employment.

### E. The non-observed economy
- Definition: Extent of economic activity missing from statistical data collections and administrative sources, including some illegal activities; overlaps with but is not identical to the informal economy.
- Non-observed elements in international accounts:
  - International transactions (and possibly positions) missing from statistical data collection and administrative sources constitute non-observed elements of the international accounts.
  - Some omissions may relate to informal economy activities; others may relate to activities outside the scope of the informal economy such as undeclared and underdeclared production and trade by formal units.
  - Merchandise trade statistics of some economies may not cover items traded by formal enterprises.
- Measurement implications:
  - Assembling national accounts, particularly using supply and use frameworks, casts light on missing information including illegal activities; balancing supply and use tables may estimate some non-observed activity but may not capture all of it.
  - Techniques from Measurement of the Non-Observed Economy: A Handbook are useful for measuring both the non-observed economy and some aspects of informal enterprises.

### F. Guidelines, studies and handbooks on the informal economy
- Purpose: Review and cite various guidelines, studies, and handbooks useful for compilers of informal economy statistics.
- Examples to be reviewed/cited (as indicated in the chapter outline):
  - Reports of the BOPCOM Task Force on the Informal Economy.
  - IMF paper, “Measuring the Informal Economy”.
  - ILO reports and guidelines.
  - ICLS resolutions.
  - Conceptual Framework for Statistics on Informal Economy.
- Implementation note: This section will summarize items cited in Annex II of the IE 1 Guidance Note and other relevant resources to inform compilers.

*Draft prepared by Brent Moulton (SNA lead) and Patrick Quill (BPM lead). — BPM7 Chapter 18/2025 SNA Chapter 39. Informal Economy: Annotated Outline. For Global Consultation. IMF Committee on Balance of Payments Statistics.*

### Section 2

### Annotated Outline SNA Chapter 39 BPM Chapter 18 - Section 2

### Schematic overview — A Introduction
- Purpose of measuring the informal activities in terms informing policy decisions
- Brief introduction of key concepts
- Emergence of new types of informal activity
- Development of a new framework for measuring the informal economy
- Distinction between the informal economy and the non-observed economy
- Structure of the Chapter

### Framework for the informal economy — B
- Definitions referring to informal units (informal sector), informal workers, and the informal economy incorporating new guidance per GN IE.1
- Set out the formal sector, the informal sector, and the household own-use production sector and their links to informal activities
- Provide guidance on measurement of informal production and labour inputs in each sector
- Per GN IE.1, clarify that unlike the SNA, the informal economy generally excludes the production of goods and services whose sale, distribution or possession is forbidden by law
- Incorporate Boxes 1 and 2 and Figure 1 from GN IE.1 providing a tabular framework and a decision tree to identify informal productive activities

### Digitalization and informal cross border flows — C
- Discuss the role of digitalization in the emergence of new types of informal activities
- Discuss informal trade and cross-border flows
- Discuss illicit cross-border financial flows

### Informal work — D
- Introduction to ILO concepts of work and employment
- Categories of informal employment (including a discussion of dependent contractors and partly informal productive activities in relation to formal employment)
- Incorporate Tables 2 and 3 from the Appendix of “Statistics for the informal economy”
- Categories of informal forms of work other than employment

### The non-observed economy — E
- Definition and background
- Relationship between the non-observed economy and the informal economy
- Discussion of non-observed transactions in the international accounts
- The role of supply and use tables and use tables in identifying some non-observed production

### Guidelines, studies, and handbooks on the informal economy — F
- Discussion of various guidelines, studies, and handbooks that provide guidance on compiling statistics on the informal economy or on the non-observed economy
- Other guidelines or studies could be cited as well if their contents are especially relevant to measuring the informal economy; for example, proceedings and papers of the Delhi Group on Informal Sector Statistics

### References (selected documents cited in the section)
- GNs IE.1     Guidance notes are posted at List of Guidance Notes for the 2008 SNA Update (unstats.un.org)
- ILO, “Statistics for the informal economy,” report for discussion at the Tripartite Meeting of Experts in Labour Statistics on the Revision of the Standards for Statistics on Informality, (Geneva, 7–10 February 2023), https://www.ilo.org/wcmsp5/groups/public/---dgreports/---stat/documents/meetingdocument/wcms_865498.pdf
- ILO, “Conceptual framework for statistics on informal economy,” room document to support the discussions at the Meeting of Experts on Labour Statistics in Preparation for the 21st International Conference of Labour Statisticians (Geneva, 7–10 February 2023), https://www.ilo.org/wcmsp5/groups/public/--- dgreports/---stat/documents/meetingdocument/wcms_867429.pdf

### Key stakeholders consulted
- System of National Account and Balance of Payments Manual editors, International Labour Organization, Joint Informal Economy Task Team, AEG, BPTT

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/annotated-outline-sna-chapter-39-bpm-chapter-18.pdf_