Friday, June 21, 2024

Zimbabwe: A Case Study On Big-Data Helping to Track Informal Economy

Over the past two decades, the economic situation in Zimbabwe has gone from bad two worst owing to many factors such as land reform and hyperinflation in the 2000s to electricity shortages and a currency crisis in more recent years. According to International Monetary Fund researcher(IMF) Frederico Lima, This Makes the country one of the most informal economies in the world.

Frederico is researching how big data can help to properly record these informal activities and get a real image of what is happening in the country beyond the official statics. As part of his research, Frederico is compiling various data sources such as satellite images, payment data, and mobile payments to track these informal activities

With these data sources, Frederico estimates that the official GDP by government somewhat underrates the level of business activities happening in the country and overrates the contraction and recovery cycle of the 2000s. He presented his findings in front of a gathering of economists and statistical officials across the globe at IMF on Friday. Lima’s study has helped benchmark the official data, including a recent re-basing of official GDP.

IMF Managing Director Kristalina Georgieva stressed the importance of such data sources in the keynote of the gathering as many governments across the world, including the US, are struggling to track the informal economy. She explained according to IMF’s research informal economy accounts for 38% of sub-Saharan Africa’s GDP during 2010–2014 and as many as 90% of jobs in some countries.

“Informality results in lower tax revenues that hinder the government’s ability to spend on social programs and investment,” Georgieva said. “This means the individuals that are most in need of social programs and of public infrastructure may not receive them.

Gaining acceptance

The practice of using big data to track the informal economy is gaining more and more acceptance. Erick Rangel-Gonzalez, a Mexico central bank data scientist has used night light data to analyze illegal activities across the sprawling capital and in Monterrey and Guadalajara.

According to his preliminary findings, the size of the nation’s informal economy is between 25%-29%. he said the estimates are based on data from US National Oceanic and Atmospheric Administration. The agency has further processed the imagery data to clear data info from thunderstorms, fires, and reflections on water, to isolate the human activity.

Challenges ahead

Although the practice of using various data sources is gaining more and more acceptance it comes with its own set of challenges as well. The main challenge lies in the form of resistance from officials who are accustomed to traditional methods and are not willing to adapt. One of the other main challenges is that this methodology lacks clinical evidence to prove it’s worthiness, others include rapidly changing technologies, access to various data sources.

“People are a little afraid of going out and giving a look to the mobile or street economy as we don’t have a formal statistical framework,” explains Ricardo Valencia Ramirez of Colombia’s statistics agency.“It’s hard, but that doesn’t mean we don’t have to do that. We have to give a direct look at the informality.” He concludes that there are many questions that we don’t have an answer now but it is important that we start answering them today.