Cuban economist Pedro Monreal highlighted a bleak economic outlook for the Island, diagnosing a scenario of stagflation in 2024, where the contraction of the Gross Domestic Product (GDP) is coupled with double-digit inflation.
According to Monreal, contrary to the optimistic announcements from the Ministry of Economy and Planning (MEP), the data indicate an economy characterized by structural imbalances and a "harsh policy of fiscal austerity."
In a thread posted on social media platform X, Monreal denounced that the MEP distorts reality by presenting what is essentially a process of stagflation as a "macroeconomic order."
According to their estimates, the Cuban economy will experience a contraction in 2024, accompanied by an annual inflation rate of between 25% and 30%. While these figures would represent a moderation compared to 2023, they would still indicate a serious imbalance.
Stagflation is an economic phenomenon characterized by the coexistence of high inflation and stagnation or economic decline, posing a significant challenge for any economic strategy.
Emphatically, Monreal emphasized that this situation is incompatible with the alleged macroeconomic progress claimed by the Cuban regime.
Fiscal austerity as a central strategy
One of the central points of Monreal's analysis is the reduction of the budget deficit, which decreased from an initial projection of 147 billion pesos for 2024 to a level of 29.7 billion in October.
However, this apparent achievement was reached, according to Monreal, through a sharp reduction in public spending, rather than an increase in revenue, which would be expected in a healthy economic environment.
The economist supported his analysis with figures showing the historical behavior of public expenditure as a percentage of GDP, which decreased from 66% in 2017 to just 39.2% in 2023, according to data from the National Office of Statistics and Information (ONEI).
This highlights, in Monreal's words, a "textbook" fiscal austerity policy, implemented in a context of two consecutive years of GDP contraction.
Impact of the contraction of public spending
The consequences of this severe reduction in public spending are evident in the deterioration of economic and social indicators.
The remuneration of workers as a percentage of GDP, which peaked at 46.3% in 2020, has fallen drastically to just 18.8% in 2023. This indicator, also reported by the ONEI, reflects the loss of purchasing power among workers in a high-inflation environment.
In this regard, Monreal indicated that this policy of fiscal austerity not only deepens economic issues but also exacerbates social inequalities in a country where the average salary is insufficient to meet the basic needs of the population.
Persistent inflation
Despite the expected reduction in inflation for 2024, Monreal emphasized that the level remains "very high."
In 2023, the year-on-year inflation reached levels higher than 40%, as indicated by data from ONEI. While a moderation is projected, it still reflects a structural imbalance that severely impacts citizens' access to basic goods and services.
According to the specialist, the Cuban regime's announcements regarding a supposed macroeconomic "restructuring" are a narrative designed to divert attention from the severe austerity measures currently being implemented.
The combination of economic decline with persistent inflation reflects the government's inability to implement structural reforms that address the fundamental issues of the Cuban economy, Monreal concluded.
Frequently Asked Questions about the Economic Situation in Cuba
What is stagflation and how does it affect Cuba in 2024?
Stagflation is an economic phenomenon that combines high inflation with economic stagnation or contraction. In Cuba, for 2024, a contraction of the GDP is expected alongside an annual inflation rate between 25% and 30%, indicating a situation of stagflation. This scenario complicates citizens' access to basic goods and services, severely impacting their quality of life.
What is the fiscal austerity policy implemented by the Cuban government?
Cuba's fiscal austerity policy focuses on a significant reduction in public spending to decrease the budget deficit. This reduction has not been achieved by increasing revenues, but rather by drastically cutting expenses, which has led to a decline in the provision of public services and the impoverishment of Cuban households.
Why is investment in tourism criticized in the economic context of Cuba?
The Cuban government has prioritized investment in the tourism sector, allocating nearly 40% of its investments to activities related to this industry. This decision has faced criticism for neglecting essential sectors like health and agriculture, which receive a tiny fraction of the budget. Despite this investment, tourism has not met the expected goals, raising questions about the sustainability of this policy.
What impact does the economic policy of the Cuban regime have on the well-being of the population?
The economic policy of the Cuban regime, marked by stringent fiscal austerity and disproportionate investment in tourism, has led to a significant decline in public services and a loss of purchasing power among workers. This has exacerbated social inequalities and worsened the living conditions of the Cuban population.
Filed under: