24 September 2024
Between 2019 and the first half of 2024 Cuba suffered a loss of more than US$4bn in external income forcing it to take urgent remedial measures, according to a detailed economic report produced by the respected Cuban economist, a former Minister of Economy and Planning, and Minister of Finance, José Luis Rodríguez.
His latest four-part analysis of the island’s economic performance up to June this year, ‘Evaluation of the International Economy and its Impact on Cuba,’ published by El Economista de Cuba and reported on in summary in Cuba’s official media, details the economic challenges facing Cuba’s government.
His principal finding indicates that Cuba’s gross domestic product (GDP) is unlikely to recover this year following its 1.9% decline in 2023 let alone, he suggests, reach the 2% increase that government had hoped for in 2024.
He cites as reasons, few signs that remittances are increasing, low levels of foreign direct investment, continuing problems with debt servicing, failures in domestic economic policy, declining production in key sectors including food and sugar production, having to manage a fiscal deficit of around US$4bn, and continuing problems with the supply of fuel and power generation.
More generally, Rodríguez indicates that Cuba continues to face both domestic and international challenges including the rise in global food prices, what he describes as “international breaches of agreements that were supposed to guarantee oil imports,” the “slow recovery in tourism”, “the consequences of mistakes made in our own management,” and a continuing fall in external income. He also addresses the difficulties government is having in resolving the challenge of stubbornly high inflation and finding resources to address social challenges.
Cuban official coverage of his latest report laid particular stress on his comments about the continuing impact of the US economic embargo, unfavourable global trends including the war in Ukraine, the impact of Middle East instability on global value chains, and the island’s continuing slow recovery from the 2020 COVID-19 pandemic.
Highlights in this issue:
- Electricity crisis worsens as power outages increase
- Legislation decentralising control of MSMEs comes into force
- Russian Railways to sign contract for 1,000 km Cuban railways upgrade
- European Commissioner defends dialogue with Cuba, criticises political detentions
- Cuba’s President seeking closer economic, trade ties with Saudi Arabia.
With the first half of the year having elapsed and taking into account that only 58% of the island’s import plan was met and the volume fell by 22%, planned GDP growth does not now seem possible Rodríguez writes.
All of this has caused, according to the former Minister, “the country to suffer a loss of more than US$3bn in external income between 2019 and the end of 2023, leading to a current fiscal deficit of more than US$4bn.
His report, published in four parts, indicates “according to unofficial sources,” that in this a significant element relates to the continuing fall in the receipt of remittances, a source of income second only to medical and other overseas services.
The remittances figure, Rodríguez writes “does not seem to have increased in 2023” despite Western Union resuming sending remittances to Cuba. Suggesting that this development should have implied a greater increase, he notes that “remittances play an important role as working capital for the non-state sector and support an appreciable level of consumption in the market that operates in MLC.”
In an apparent indication of the absence of available official data, Rodríguez cites a 2021 report seen by CNN indicating that “26% of Cuban households received remittances, accounting for around 2% of GDP” of which 84% came from the US and over 60% arrived informally. Referring to an estimate made by the Inter-American Dialogue, that suggested that such transfers in 2023 stood at US$2.5bn, the former Finance Minister says that “there is no clear evidence that remittances have grown to that level last year.”
On the subject of the island’s official debt, he notes that a new renegotiation with the Paris Club indicates, “a supplementary period was established for the payment of the debt, although no further details of it are known,” that in the case of Russia “payments were postponed until 2040,” and that work is being done on restructuring the debt with China.” Observing that Cuba is willing to repay its external debt when economic conditions improve, Rodríguez emphasises that it remains “essential to return to the alternative of a more flexible renegotiation of the debt,” as at an estimated US$29.4bn at the end of 2023 it is equivalent “to more than 40% of the GDP.”
Referring to Government’s plans announced earlier this year to try to address ‘distortions’ in the economy and return it to growth, Cuba’s former Finance Minister suggests this marks an essential turning point in a process of transformation requiring bold and rapid decisions. Rodríguez warns this must take account of the risks and the need for balance between the cost and benefits the changes imply.
Highly complex measures require the consensus of the population, in order for them to have the success we need, he concludes. “We are aware of the seriousness of the economic situation and that action is necessary. It would be bad, very bad news to remain paralysed or to insist on following a path that has proven to be impractical because it is unsustainable,” he warns.
The full report including detail on the behaviour and trends relating to the economy, trade, and the island’s main value chains can be found in its four sections published in Spanish on the website of El Economista de Cuba: https://www.eleconomista.cu/?s=jose+luis+rodriguez
24 September 2024, Issue 1249
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