Photo by Charles Corbin
25th July 2022
The Cuban economy is expected to grow by 4% this year, according to Alejandro Gil, the Minister of Economy and Planning.
Addressing members of Cuba’s National Assembly, Gil said that up to the end of March the economy grew by 10.9% compared with the same period in 2021 but is still 7.3% below where it was in 2019. Stressing that the goal is gradual economic recovery following a period of near paralysis during the pandemic, he told legislators that the objective is “to reach the levels of activity that we had in 2019.”
In his address he said that gradual recovery began in 2021. After two years of contraction in 2019 and 2020, GDP grew at constant prices by 1.3% last year. Although the economy had been growing in 2017 and 2018 by 1.8% and 2.2% respectively, the tightening of the US embargo had resulted in 2019, he said, in a contraction by 0.2%, and again in 2020 by 10.9%, because of the national lockdown caused by the pandemic.
In his remarks he warned that economic recovery will be slow, because “we have a blockade, we are coming out of COVID-19, with inflation in the world, and in a complex global economic environment.”
Gil said that in the first quarter of the year the export of goods increased by more than US$300mn, mainly due to high nickel prices on the world market. Other sectors making a positive contribution, he noted, were sugar, despite the harvest’s overall outcome being well below plan, honey, tobacco, rum, biopharmaceuticals, and telecommunications services.
Speaking about tourism, Gil indicated that the goal of receiving 2.5mn visitors in 2022 remained. “It is a key factor in this year’s recovery. We do not have a substitute source for that income.” Addressing members of the National Assembly, he said that overall, foreign exchange earnings in the first half of this year amounted to more than US$2.5bn, a sign of recovery. He noted however, that the figure was US$1.5bn below such receipts in the corresponding period in 2019.
Looking ahead, he said that the objective was “to reach 2019 levels as quickly as possible.” However, Gil warned that achieving this depended on both the behaviour of the world economy and the delivery of planned actions in Cuba.
In his comments he noted also that the importation of food and fuel had resulted this year in a overspend above that budgeted of at least 50%; that there had been a slight recovery in agricultural production, although supply was “well below demand”; and that the “complex situation” with energy, the supply of diesel fuel, and with power generation persisted, “slowing the recovery of the economy.”
Speaking about inflation in the official economy, Gil said that this stood at 77.3% in 2021 and at 28.8% for the first six months of this year. He recognised however that these figures hid the difficulties faced by most Cubans who had to purchase food and other items on the informal market where prices and inflation can be much higher.
On the measures taken so far, Gil said that they had been limited in their effect and that more effective actions were required within Cuba’s social context. Such measures, he said, must be “objective, consistent and adjusted to our possibilities,” and take into account productivity, scarcity, a lack of foreign currency, addressing the fiscal deficit, and imported inflation.
Although no reliable statistics exist, most analysts put price inflation in 2021 in the country’s informal economy at somewhere between 600 and 700%.
New measures aim to ease shortages
In his remarks Gil unveiled a further package of measures aimed at trying to stimulate the Cuban economy, increase investment, address the severe impact of the US embargo and sanctions, and the impact of shortages of essential items.
In doing so, he announced the further easing of restrictions on personal imports by individuals, the possibility that foreign entities may before long be able to invest in non-state enterprises, and government’s intention to re-establish an official foreign exchange mechanism for the US Dollar at a rate still to be specified.
Speaking about easing foreign exchange restrictions, he said that a new exchange market for the sale of foreign currency to Cubans will be introduced at an exchange rate “economically based and where we can work with all currencies, including dollars in cash.” It will, he said, operate at “differentiated prices” to allow the State to capture the currencies that are circulating in the economy. It will also be available to international travellers.
Gil said that the details of this were being finalised and the risks evaluated with the objective of increasing Cubans’ purchasing capacity in Cuban pesos (CUP). The new measures, he stressed, did not mean dollarisation of the Cuban economy but were intended to fill a missing element in the monetary and economic reform process.
Other economic measures to be introduced include:
- Establishing a regulatory framework for foreign investment in the non-state sector
- Resizing the state’s budgeted sector
- Stimulating electronic commerce.
- Authorising Correos de Cuba to undertake cross-border electronic import-export activities
- Allowing products offered by foreign and national suppliers to be marketed on a consignment basis
- Implementing a new scheme for the access and allocation of foreign currency to state and mixed enterprises
- Continuing to expand secondary foreign exchange allocation schemes for state and non-state economic actors
- Encouraging the emergence of a greater number of export-oriented state MSMEs
- Increasing the establishment of mixed state-private companies.
Gil also announced a wide range of other measures aimed at supporting the Cuban population by easing restrictions on the non-commercial importation of goods by individuals, while outlining a range of social initiatives to support the most vulnerable.
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