Independent economists stated that the slowdown of inflation in Cuba is not genuine.
This trend is not due to an economic improvement, but rather to a contraction caused by impoverishment, a phenomenon that reflects the drastic loss of purchasing power among the population, explains a report from the Cuba Monetary and Finance Observatory (OMFi).
The Cuban regime celebrated last Monday that the year-on-year inflation rate in the formal Cuban market stood at 16.43% in May, which represents the lowest level recorded since the onset of the pandemic.
However, the report from the observatory, an independent entity associated with the media elToque and comprised of economist Pavel Vidal and developer Abraham Calás, asserts that in Cuba, "the purchasing power of salaries and pensions has been practically annihilated by years of high inflation, without being offset by increases in income."
"It is the so-called 'inflation tax' that families relying on fixed incomes in Cuban pesos have been paying," they add.
The report explains that impoverishment has caused certain key products to reach a price ceiling in the short term due to the inability to afford them.
"This does not mean that 'the supply conditions have improved, but rather that the limits of demand are determining price behavior,' warns the document."
The adjustment is related to the increases in the official prices of widely consumed goods, such as fuels, electricity, and ETECSA's internet services.
"The rate hike by ETECSA will be reflected promptly in the CPI for June and will represent a shock to the costs of operating businesses, especially in the more digitalized activities. Nevertheless, its net effect over time may be anti-inflationary, as it also helps generate fiscal revenues and reduce the amount of pesos in the hands of the population," said Vidal, a lead researcher at OMFi.
The document also states that these official figures do not account for the prices in informal markets, making it evident that inflation for Cubans is higher.
However, for the specialists at OMFi, the official figures could indicate a genuine slowdown in the rate of price increases, which does not imply a decrease in prices or a recovery of purchasing power, but rather a deceleration in that rise.
The OMFi report mentions two other factors that could explain the slowdown of inflation in Cuba: the first is a reduction in the fiscal deficit, and therefore, a lower issuance of money to finance it; the second is the moderation in the pace of depreciation of the peso in the informal market.
OMFi concludes that this slowdown is not sustainable over time due to the structural unproductivity of the state sector, the weakness of fiscal institutions, and the multiple exchange rates that distort the economy.
Inflation in Cuba
The National Office of Statistics and Information (ONEI) reported this Monday that the year-on-year inflation in the formal Cuban market was at 16.43% in May, which represents the lowest level recorded since the start of the pandemic.
This figure, although significantly lower than the 31.11% reported in May 2024 – according to official statistics – is still considered high and strongly impacts vulnerable sectors such as workers, retirees, and low-income families.
On a monthly basis, the consumer price index (CPI) showed an increase of 0.83%, while the year-to-date accumulated variation reached 7.45%.
The ONEI also highlighted that more than 90% of Cubans' income is allocated to cover the products and services included in the basic basket, which serves as the basis for the calculation of the CPI, even though it actually does not meet fundamental needs.
By sector, the most significant increases were recorded in Alcoholic Beverages and Tobacco, with an alarming year-on-year rise of 119.79%.
They were followed by Restaurants and Hotels (23.62%), Various Goods and Services (16.89%), Education (16.83%), and Housing-related Services (15.35%).
Only four categories showed increases below 10%: Recreation and culture (7.94%), Transportation (5.54%), Health (0.83%), and Communications (0.46%).
According to official statistics, inflation has had a devastating cumulative effect: since 2020, prices have tripled, and the CPI closed 2021 at 77%, then dropped to 39.07% in 2022, 31.34% in 2023, and 24.88% in 2024.
Among the products that pushed monthly prices up in the "Food and non-alcoholic beverages" division, rice, chicken eggs, and pork stood out.
These foods, essential in the average Cuban diet, had a significant impact on the overall index variation, reflecting not only their weight in daily consumption but also the instability of their availability and price in the formal and informal market.
However, the public perception is that the actual inflation is much higher than what is acknowledged by the authorities.
Frequently Asked Questions about Inflation and the Economic Situation in Cuba
Is the slowdown of inflation in Cuba real?
The slowdown in inflation in Cuba is not real, according to independent economists. This apparent deceleration is not due to economic improvements, but rather a adjustment for impoverishment that reflects the loss of purchasing power among the population.
What is the "inflation tax" in Cuba?
The term "inflation tax" refers to the loss of purchasing power experienced by families who rely on fixed incomes in Cuban pesos due to high inflation. Wages and pensions have not been offset by increases in income, which has obliterated their purchasing capacity.
How does ETECSA's rate hike affect the Cuban economy?
The ETECSA price hike represents a shock to the costs of operating businesses, especially in digital activities. While it may help reduce the amount of money in the hands of the population, it also generates social unrest and limits access to basic communication services.
What is the perception of real inflation among Cubans?
The perception among citizens is that the actual inflation in Cuba is much higher than officially acknowledged. This is because official figures do not adequately reflect the prices in the informal market, where costs are significantly higher.
What factors contribute to the slowdown of inflation in Cuba?
Two factors mentioned in the report from the Observatory of Currencies and Finances of Cuba (OMFi) are the reduction of the fiscal deficit and the moderation in the depreciation of the peso in the informal market. However, the slowdown is not sustainable over time due to structural problems in the Cuban economy.
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