SHADOW ECONOMY AND ITS IMPACT ON THE FINANCIAL AND ECONOMIC SECURITY OF THE STATE

Abstract

Ukraine’s economy is characterized by the presence of a rather largein size and capacity of the shadow sector, which is an integral part of thedomestic national economic system. The issue of shadowing of economicactivity creates a significant number of other related problems, reducing the effectiveness of public policy, restraining economic growth, distorting the conditions of economic activity, threatening the financial and economic security of the country. That is why the chosen topic is relevant and needs a comprehensive discussion.The purpose of this work is to study the shadow manifestations in thedomestic financial and economic activities, to identify the impact of shadow processes on the financial and economic security of the country, to analyze the shadow sector of Ukraine and identify possible ways to minimize it. According to the results of the analysis of the main causes andconsequences of the existence of the shadow economy, both its negative and positive impact on the financial and economic security of the state was determined. In particular, the high level of the shadow economy negatively affects the development of the national economy, distorting the conditions of economic management, reducing the revenue side of the budget, increasing its deficit. Among the important negative manifestations of the shadow sector is the reduction of investment attractiveness of the socio-economic system, increasing the inefficiency of institutions of state regulation of the economy, the criminalization of society. At the same time, the shadow economy acts as a stabilizer of the economy, creating additional jobs, stimulating the growth of entrepreneurial initiative and strengthening social, labour and professional mobility.Analysing the impact of shadow economic activity on the economicdevelopment of the state, we came to the conclusion that its functioning has an impact of economic, political and social nature. Economic activity in the shadow sector is carried out outside the law, which prevents the stable development of society. The development of shadow economic activity in the country threatens its financial and economic security, reduces the efficiency of the use of monetary policy instruments or eliminates their use in general, significantly affects the volume and structure of GDP. That is, the shadow economy is a real threat to the national security of the country, slows down its transition to a market economy, the introduction of European living standards in Ukraine.