Prostitution and drugs will contribute to a “minor” increase in GDP when these are included in the national estimates later this year, according to the head of the State statistics office.
The illicit trades are expected to form part of the National Statistics Office’s gross domestic product figures this September in line with an EU-wide data collection reform.
The real increase will come from special purpose entities that were not being calculated before
NSO director general Michael Pace Ross told Times of Malta the reform would see “the unobserved economy”, such as the drug trade and prostitution, included in the national accounts.
“The figures on drugs and prostitution have been collected before but were never included in the official accounts. GDP is about calculating transactions – when funds are exchanged between two or more consenting parties for a product of service. So, including these figures should give a fuller picture of the economy in terms of legal and illegal transactions,” he said.
Mr Pace Ross would not give the exact amount the two practices were expected to contribute to the country’s economy, saying only that the increase would be much smaller than that forecast for other EU member states.
On the whole, GDP is expected to rise by two per cent when the reform is introduced. But Mr Pace Ross said most of the increase would result from the introduction of estimates on brass-plate companies, firms registered in Malta but with no physical presence on the island. Other main contributors, he added, would include changes to the way the economic impact of the insurance sector was calculated.
“Some might think that GDP is going to shoot up because of the introduction of prostitution and drugs to our estimates but this is not the case. The real increase will come from special purpose entities that were not being calculated before,” he said, adding that the NSO had been working tirelessly to introduce the new technical mechanisms to their estimations.
Asked how the figures on drugs and prostitution were collected, Mr Pace Ross said the NSO had been liaising with stakeholders in line with established methods used across the EU.
State statisticians, he said, had been in contact with the police and other stakeholders such as government rehabilitation service Sedqa, to understand the local drugs and prostitution landscape.
“When it comes to prostitution, there are different types: those working the streets, others in hotels and those in clubs, all of whom offer different services at different prices. We liaised with professionals working in the field to better understand this sector,” he said, adding that the slice of the profits taken by pimps had even been taken into consideration.