Deceleration threatens Cuban economy

Economy Minister Adel Yzquierdo ratified before the MPs that the GDP would grow in 2013 less than what had been previewed in December and would possibly be less than in 2012, after a lukewarm takeoff in the first half of the year.

Archivo IPS Cuba

External contingencies added to the persistent internal mistakes in planning and productivity made it necessary to reduce the previewed economic growth for the current year.

The Cuban economy is being threatened by deceleration, judging by statements by Economy Minister Adel Yzquierdo, confirmed in the recent regular session of the National Assembly of People’s Power. “A growth of between 2.5 and 3 percent is expected for the close of the year,” he said before the MPs in an assessment of the internal and external reasons that are holding back the island’s economy.

That magnitude of the gross domestic product (GDP) growth, which he had disclosed in a meeting of the Council of Ministers made public on July 1, a week before the parliament meeting, is less than the 3.6 percent expansion previewed in the National Plan approved in December 2012.

What is most significant in the new expectations for the close of the year is that the GDP will not be able to exceed last year’s upward trend: in 2012 it grew 3 percent, according to data by the National Office of Statistics and Information (ONEI). Moreover, it could confirm a slowing down if it is less than that figure, as it seems possible according to the forecasts of Yzquierdo and the year’s takeoff.

In the first semester, the Cuban economy only grew 2.3 percent. The authorities are not showing signs of alarm in the face of this figure and Yzquierdo considered the performance “favourable” because it surpassed by two decimal points that indicator during the same period of the previous year. The economy minister blamed fundamentally external factors for the setbacks, though he also recognised the country’s internal weaknesses.

In first place he cited the damages caused by Hurricane Sandy, which hit eastern Cuba in October 2012. Throughout 11 provinces “the recovery actions after the hurricane have cost the country 6.9 billion pesos,” he said. Just in the eastern province of Santiago de Cuba it caused more than four billion pesos’ worth of damages, he continued. With those amounts, the cyclone classifies among the most destructive to have hit Cuba in recent times.

Sandy caused serious damages to homes, warehouses, poultry production, agriculture and the sugar agribusiness. The national sugar production plan was not met by 20 percent, though it grew 8 percent. The non-fulfilments in sugar production and the sale of eggs (poultry farming) are two of the factors that prevented a larger general takeoff of the GDP in the first half of the year.

In a sort of forced consolation, the economy minister said that the national performance is in tune with the trends anticipated for the region by the Economic Commission for Latin America and the Caribbean (ECLAC), an agency that has also readjusted to the low its economic forecasts for the area.

The Latin American and Caribbean economies will grow 3.5 percent in 2013, less than December’s previous estimate that placed the growth at 3.8 percent, ECLAC recently forecasted. Though that institution points out the recoveries of the economies of Argentina and Brazil among the positive factors, it cites the international uncertainty caused by the crisis in Europe, a problem also mentioned by the Cuban minister in the assessment presented to the MPs.

Tourism, one of the principal sources of hard currency in the island’s economy, has had in the first months of 2013 a poorer than expected performance. The 1.7 percent decrease in tourist arrivals become more acute from countries like Spain (-18.2% up to May, according to ONEI), Italy (-16.1%) and others from Western Europe, which together with Canada constitute the principal tourist markets for Cuba.

Another drop that is creating tension in Cuban accounts is in the prices for nickel on the world market. That mineral ranks first in the Cuban portfolio of export goods.

Yzquierdo strongly criticised once again in this parliament session the execution of investments – 9 percent below the plan, though they are growing by 16.6 percent – for their bad planning, delays in the purchase of construction products or mistakes in the agreement among the companies involved in the investment process.

He also expressed dissatisfaction with the non-fulfilments in agricultural productions, because of deficient contracting among producers and collection companies. This made it necessary to take part of the 168 million dollars saved because of lower import prices to buy food and cover the planned supply: the country spent 48 million dollars in additional imports.

The internal deficiencies, still visible despite the economic reform known as the “updating of the Cuban economic model,” combined with external tensions, continue setting back a more solid takeoff of the Cuban economy and keep it far from the average 4.4 percent annual growth that the very economy minister presented in 2011 as a need or objective of the economy until 2016. (2013)

 

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