The missed tax revenue caused by the informal economy have recently risen to 7.3% of GDP. Every year, the budget loses about 15 billion lei due to informal economy. Since 2007, the non-observed economy has gradually grown in Moldova to about a quarter today. The increase is due mostly to tax evasion, salaries paid under the table and underreporting of incomes.

“But the largest component of the non-observed economy remains the production of households for own consumption in the agricultural sector,” said Adrian Lupușor, executive director of Expert-Grup, during the presentation of a study titled “Informal economy and employment in the context of the COVID-19 pandemic” and commissioned by UNDP Moldova.

The increase in tax evasion is particularly noticeable in the construction sector. “It is relevant that the public investments that have boosted the construction sector have led to an increase in informal employment and informal economy in the construction sector,” said Adrian Lupușor.

With the pandemic, however, informal employment has declined. It serves to show the vulnerability of informal jobs to shocks and crises like the one seen in 2020. It’s those jobs that have been most exposed to layoffs. The number of informal jobs has dropped twice as fast as the total number of jobs, said Adrian Lupușor.

Another example of how shocks affect informal employment are droughts in the agricultural sector. The number of informal jobs has fallen faster than the total number of jobs. Women were disproportionately affected: the number of jobs occupied by women decreased by 16.3%, whereas men lost 2.1% of their jobs.

HoReCa, trade and industry were the worst affected sectors during the pandemic. Income inequality has increased, in the sectors where incomes are highest the growth has been higher.

According to the perception among companies, as measured by an opinion poll, every fifth company considers that the practices of tax evasion are widespread throughout the economy. A quarter of economic activities are not reported. Almost a third of respondents believe that salaries paid under the table exist in virtually every company to a higher or lesser degree.