14:10 | 06/11/2018 Global Economy
Communist-run Cuba’s economic growth will come in at around 1 percent this year, compared with the 2 percent previously forecast, due to a fall in exports and tourism revenue, state-run media reported over the weekend.
|A Cuban flag decorates a subsidised state store, or "bodega", where Cubans can buy basic products with a ration book they receive annually from the government, in downtown Havana, Cuba - Photo: Reuters|
The Caribbean island’s gross domestic product grew 1.8 percent last year and 0.5 percent in 2016.
Economy and Planning Minister Alejandro Gil Fernandez reportedly told a council of ministers meeting that the lowered GDP growth forecast for this year was due to “less than expected revenues from activities such as tourism, the harvest (sugar) and mining (nickel),” three key revenue sources for Cuba. Gil said austerity measures, which began in 2016, would continue into 2019. They include cuts in energy and fuel to state companies and reduced imports of consumer goods and inputs for the economy.
Cuba’s economy is notoriously inefficient and dependent on foreign revenues. The government also spends a large amount of its revenue on the country’s free healthcare system, education and other services.
The Trump administration is also tightening sanctions on Cuba that have been in place for more than a half a century and which were loosened a bit under former U.S. President Barack Obama. Some economists have estimated that Cuba’s import dependence is as much as 17 cents for every dollar of product produced.
Cuba’s export revenues have declined every year since 2014, even as debt payments mounted, offset somewhat by increased revenues from telecommunications and remittances, though those earnings are treated as state secrets.
Combined exports and imports fell around 25 percent from 2013 through 2017, with imports dropping to $11.3 billion from $15.6 billion during that period, according to the government.
In August, the government slapped a hold on already approved “non-essential” imports.
Pavel Vidal, a former Cuban central bank economist who currently teaches at the Universidad Javeriana Cali in Colombia, said the country was piling up budget deficits to keep the economy growing. Cuba’s budget deficit reached 8 billion pesos last year, nearly 9 percent of its GDP, Vidal said.
“This helps stimulate growth, but by accumulating a financial bubble in the form of public bonds in the hands of state banks,” he said. “It can’t go on forever.”