The National Statistics Office is going to include the estimated ­revenue from narcotics and prostitution in its GDP reports as from September – but with its eyes wide open with regard to the problems with­collecting data about illegal activity.

“Getting an estimate of undeclared revenue is never easy but I can assure you that we have to gather the data in the same professional way that we gather all data,” director general Michael Pace Ross said.

These statistical requirements have actually been in place for years now, at both EU and international level – in fact, smuggling should also be included. “The reason for this is that GDP is about measuring all economic activity. Both declared and undeclared need to be taken into account, in order to have a full and accurate picture of the value of ­production/consumption in a given period. This is necessary to reflect the real state of the economy.

“Therefore, UN international standards require that estimates of the non-reported economy are included in the calculation of GDP.

This includes illegal activities, the shadow economy, misreporting, and so on,” a European Commission spokes­man said after the media in other countries – particularly Italy – had a field day with the concept.

Mr Pace Ross said that the NSO tapped into the experience of a number of entities to compile the data, ranging from police and government agencies like Sedqa and Appoġġ, to hotels, nightclubs and councils.

“Clearly, we acknowledge that what we know about will be the tip of the iceberg but in spite of this we do not expect it to have a significant impact on our GDP here.,” he added.

In spite of the obligation, national statistics offices did not include these activities in their reporting but member states recently agreed to fine-tune the way in which they approach this data, to ensure consistency and coherence.

The new statistical rule-book (ESA 2010) also affects the way in which R&D is reported which will now be considered as an investment rather than expenditure, as will military spending, and there will be a more detailed analysis of pension schemes.

The UK could add as much as £10 billion to the value of its GDP by including prostitution and illegal drugs by one estimate, enough to boost the size of its economy by 0.7 per cent. Austria, Estonia, Finland, Norway, Slovenia and Sweden have all begun including these figures.

France is resisting even though there are estimates that it could lead to an increase in French GDP of 3.2 per cent.

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