## Counting Everything That Counts

_IMF News, November 14, 2019_

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**Canonical URL:** [Counting Everything That Counts](https://www.imf.org/en/news/articles/2019/11/14/sp111419-counting-everything-that-counts)

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## Bibliographic details
- Published: November 14, 2019

---

### Context and purpose
- Opening Remarks by IMF First Deputy Managing Director, David Lipton
- IMF Seventh Statistical Forum: “Measuring the Informal Economy”
- Washington, DC
- November 14, 2019

### Why measure informal activity
- Informal activities are often hidden to avoid tax obligations or laws, complicating measurement and policy design.
- The informal economy can be as large as, or larger than, the formal sector in some low-income countries.
- Accurate measurement would improve policy tools, e.g., assessing debt sustainability or applying fiscal rules.
- Illustrative experience: when working on Poland in the early ‘90s, shifts to informal production explained apparent declines in formal sector output (food processing example).
- Relevant observations and quotations preserved from remarks:
  - “Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.”
  - “if you can’t measure it, you can’t improve it.” (Peter Drucker)

### Path forward: concepts, capacity, and incentives
- Historical and institutional foundations:
  - IMF established a conceptual framework to measure the informal economy in 1982 with a book called The Underground Economy in the United States and Abroad.
- Capacity building:
  - The IMF Statistics Department has enormous demand for Technical Assistance to improve GDP measurement.
  - By covering economic activity that was previously not- or ill-measured, one country in Africa saw its GDP increase by 89 percent!
- Incentives for formalization:
  - Reforms across taxation, labor law, product markets, and the business climate can encourage formalization.
  - Countries cited as having achieved important results through formalization efforts: Egypt, India, and Mexico.
- Institutional initiatives:
  - IMF staff formed a task force on the informal economy in 2017 to identify data collection techniques and compilation methods to reflect the informal economy in external sector statistics.
  - Work with other international agencies on illicit financial flows is ongoing.
  - One case presented at the Forum argues that tracking illegal activity in the US national accounts would have raised 2017’s GDP by 1 percent.
- Collaboration:
  - The World Bank, the International Labor Organization, and the UN are active on informality from labor-market perspectives; the IMF collaborates closely with them.

### The power of Big Data and new techniques
- Big data, AI, and innovative data sources can provide new insights on economic activity and help measure the informal sector.
- Examples highlighted for upcoming presentations:
  - Chinese National Bureau of Statistics: using transactions on digital platforms to observe informal activities; key challenge is disentangling informal activity from already formal activity.
  - Central Bank of Mexico: using satellite nightlights imagery to estimate that the “non-registered” economy in the country could represent up to 29 percent of GDP.
  - Fund researchers have used similar techniques to gauge economic activity in Iran and Venezuela.
  - Use of big data to estimate economic activity in countries where official GDP and trade data are imprecise or too delayed, e.g., Zimbabwe.

### Key takeaways and objectives for the Forum
- Return to core statistical business: measuring economic activity accurately using all possible means.
- Objectives for participants:
  - Share practical advice on measuring informality.
  - Explore methodological innovations and capacity-building approaches.
  - Identify actionable ways to incorporate informal activity into macroeconomic statistics.

*Opening Remarks by IMF First Deputy Managing Director, David Lipton — IMF Seventh Statistical Forum: “Measuring the Informal Economy”, Washington, DC, November 14, 2019*

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## References

- [David Lipton](http://www.imf.org/external/np/omd/bios/dl.htm)
- [7th Statistical Forum](https://www.imf.org/en/News/Seminars/Conferences/2019/03/25/7th-statistical-forum)
- [6th Statistical Forum](https://www.imf.org/en/News/Seminars/Conferences/2018/04/06/6th-statistics-forum)
- [Blog: The Global Informal Economy: Large but On The Decline](https://blogs.imf.org/2019/10/30/the-global-informal-economy-large-but-on-the-decline/)
- [Mexico and the IMF](http://www.imf.org/external/country/MEX/index.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/11/14/sp111419-counting-everything-that-counts_