HAVANA TIMES – Forecasts for economic recovery in Cuba are no more than 2%, after the GDP dropped 10.9% last year and the previous, more optimistic, forecast of 6% growth. Almost 24 months of cumulative crisis, made worse by the combined effects of US sanctions and the COVID-19 pandemic, 2021 hasn’t been a better year: it’s been reported that the country will bring in 500 million USD less in revenue than it did in 2020.
“An 11% drop will be hard to recover from in the short-term,” Deputy Prime Minister and Minister of Economy and Planning, Alejandro Gil, warned at a press conference. He talked about these and other numbers during an update about the Cuban economy when we entered the last trimester of the year.
1. “There is no limit for small and medium-sized enterprises”
Gil says that they have received concerns over the number of small and medium-sized enterprises that will be authorized. “We don’t have a limit for small and medium-sized enterprises.” Nor is there a time limit and we aren’t planning on stopping granting authorization once we reach a certain number of small and medium-sized businesses,” he said.
Small and medium-sized businesses in the private sector have created approximately 3000 jobs, he reported. Between January and September 2021, the Cuban economy has generated a total of 200,000 jobs,” (the rest in the State sector), Gil noted.
2. “Covering basic needs”
“The country has been able to satisfy the population’s basic needs,” the minister says. “In order to reduce the impact of blackouts on the population, we have paralyzed or slowed down economic activities, such as cement and steel production.”
“Repairing and making the national electricity grid sustainable is expensive: we are spending between 60-66,000 tons of diesel every month to support electricity generation. At today’s prices, this is never below 50-55 million USD; and we have to use other resources for electricity generation.”
3. “A more dynamic economy”
Gil announced that the Economic Plan for 2022 has still not been written up; it will be presented to the National Assembly of People’s Power in December. “This year, we are entering the second phase of the National Plan for Economic and Social Development”, after the first phase, between 2019-2021, whose objectives he said have only been partially met.
The second phase will last until 2026 and the minister says that we are going to be “in better condition”: with “a more inclusive, more dynamic economy, […] with a more diverse productive sector and greater participation from state-led and private businesses.”
4. “The economy won’t get better overnight”
The minister announces entering “a gradual phase of economic recovery. The economy won’t get better overnight, lines won’t end suddenly, nor will shortages…” We can’t create false expectations, he added.
Gil reminded the population that in 2020, the Cuban economy lost approximately 2.4 billion USD of revenue, compared to 2019, “which was essentially linked to a stricter US blockade and the impact of the COVID-19 pandemic.”
This year, a deficit of 500 million USD has been reported in 2020. As we know, the economy shrunk by 10.9% last year. “It’s a steep drop” which “is felt in Cubans’ everyday lives,” the minister said. “An 11% drop will be hard to recover from in the short-term,” he warned.
5. “Shortages are the reason for inflation”
Far from the paradigm of fixing prices or increasing wages, Gil said that today, the focus is centered “on how to increase products on sale to fight inflation.” He called on “social responsibility and ethics”, which he described as “calling on every economic player to understand and help the country to overcome this situation. Not to take advantage of the situation in an almost criminal way […] There are people who want to get rich and become millionaires by reselling.”
The monthly demand of pork “is 17,000 tons and we don’t even have 2000 or 3000.” He said that the new measures for agriculture published last April have had some impact on food availability. “We had 120,000 tons of products via Cuba’s State purchasing entity (ACOPIO). In August, this went up to 135,000; in September, 131,000. [It’s] still way below demand, but it is beginning to recover.”
“We will slowly recover levels of activity that have been lost in the past two years, as well as supply levels of certain products that have been in shortage since mid-2019,” he promised.
6. Unanswered questions “for the time being”
The minister explained that he couldn’t give “an exact number” for the official estimate of inflation because they are “rebuilding the database.” Given the fact that the Cuban peso suffered a devaluation on January 1, 2021, “the comparison includes inflation of prices as well as the currency’s devaluation.” Within a sampling of goods and services, comparing “a 2021 price with one from 2020, […] there are elements that make it difficult for us to calculate this technically. It’s steep though, there’s no doubt about that.”
Another one of these elements “is that official records don’t always measure real prices.” Inflation of one product might “be planned; but it can be distorted because people are buying this product in real life for three or four times the price” in stores. “In today’s situation, the illicit market accounts for an important part of consumption. We can’t just assume that most people are buying the products at official prices.”
In terms of tourism, he said that “this year, we won’t reach 2.2 million visitors. We are getting ready for this peak season. We are rescheduling so that we can beat 2 million visitors in 2022. We don’t have an exact target in mind this year, but we don’t have a limit.”
7. “Living a decent life in Cuba”
The minister said that economic reforms targeting the private sector aren’t focused on containing the drain of the workforce, especially of young people. “We aren’t making small and medium-sized enterprises or CNA [non-agricultural cooperatives] a migration issue. We believe that young Cubans should and can have a life plan by working at a state-run company, at a hospital, at a school, in communal and public services. […] We are working so that every job position receives worthy remuneration and people can live a decent and dignified life in Cuba, regardless of the sector they are working in.”
“We believe that this is an inclusive country where young people have a project that fits in with their life expectancy […] Everything we are doing in terms of diversifying production and including this workforce of young people is so that people can live a respectable life in Cuba and are happy living in our country.”
He announced that “out of the 200,000 new jobs created between January-September this year, 35% will be occupied by young people under the age of 35 and 36% are women,” both in the private and public sectors.
“Our state-led companies have to be efficient, and they have to be a place where people enjoy working, and not where they don’t get this renumeration they long for.” He said that wages could go up to 10,000 pesos and that 4,192 pesos is currently the average salary in the public sector, and that limited purchasing power is due to inflation, which is temporary.
8. “We don’t believe we will reach 6% growth”
“We hope that the economy will recover in the second semester of 2021. In the second trimester of 2021, the economy grew 7.5%. It’s practically 0% growth compared to the same period in 2020. But in the first trimester of 2021, we shrunk by 14%.” compared to the first trimester in 2020.
“We don’t believe we will reach 6% growth, which is the target in this year’s Economic Plan. We would have to grow more than 14% in the second semester of 2021. Bearing in mind the fact that key economic activities will only resume in the third trimester, we won’t be able to meet these targets for growth. We are trying to reach 2% growth [we’re still in the negative], which is the figure that ECLAC has forecast for us too. To do this, we would still have to grow quite a bit in the second semester compared to the same period last year, but we are moving in this direction.”
In terms of the 2022 Budget, it still hasn’t been written up. “This is why I can’t give you a target for growth next year. […] But we aren’t working just for targets. We aren’t working to make a GDP: we are working to satisfy more and more of our people’s needs and demands.”