Cuba is considering an ambitious fiscal package and economic reform to boost its GDP growth in the face of international restrictions on its trade, tourism, and investment.
Kristian Rouz – Cuba’s National Assembly is holding its mid-year session in Havana, with measures to improve the island’s ailing economy dominating lawmakers’ agenda.
The Cuban government has acknowledged the Socialist nation finds itself in the middle of a financial crisis, but officials believe there is a way to offset the negative economic impacts of the mounting diplomatic pressure from Washington.
According to Cuban President Miguel Diaz-Canel, the island nation’s GDP could post modest growth by the end of this year, if his proposed plan to increase domestic production of goods and services turns out to be successful.
“Even in the eye of the hurricane of adversity that the enemy conceived to suffocate us, the Cuban economy can grow slightly, thanks to the fact that we have the potential to resist and continue advancing in our development,” Diaz-Canel said.
The Socialist nation has been at odds with the US over the past few years, particularly since the election of Donald Trump back in 2016.
Trump has arguably reversed the nascent thaw in the Cuban-US relations under the previous administration. Washington has expressed concern with alleged human right violations and political repressions by the Cuban government, as well as the diplomatic fallout resulting from the mysterious ‘sonic attacks’ against the American and Canadian diplomats in Havana in 2017.
The State Department has also been concerned with Cuba’s alleged support for the Venezuelan government of Nicolas Maduro, and the tight economic cooperation between Havana and Caracas in the face of US sanctions.
“The Venezuelan shock in the Cuban economy is not something that is bound to happen in the near future, but has already been happening since 2015,” experts from the Madrid-based think tank Real Instituto Elcano wrote in a new report.
Against this backdrop, Diaz-Canel remains modestly optimistic of the future of the Cuban economy – despite the nation facing shortages of consumer goods, and its international trading ties having faced numerous international restrictions for years, if not decades.
The Cuban president claims the island nation’s economy grew 2.2 per cent last year, and will expand by 1.5 per cent this year. Some economists have estimated Cuba’s GDP growth at just 1.2 per cent in 2018.
Havana’s plan to boost economic growth going forward includes several conventional measures, such as greater support for domestic manufacturing, as well as non-conventional tools. For example, Cuban officials are increasingly interested in crypto-currencies, which they believe could facilitate capital flows to and from the island in defiance of international pressure.
“We are studying the potential use of cryptocurrency… in our national and international commercial transactions, and we are working on that together with academics,” Alejandro Gil Fernandez, the Cuban Economy Minister, said.
Cuba’s ally Venezuela has already introduced its digital currency, the Petro, in February 2018. However, it is deemed hardly possible to evaluate the effects of such a move to the Venezuelan economy, as the struggling Socialist nation has been mired in political turmoil for months, which has effectively discouraged international investors from doing business there.
It remains unclear if a cryptocurrency of its own could help Cuba increase its foreign trade. Even the volume of trade between Cuba and Venezuela has decreased from $8.5 bln in 2012 to $2.2 bln in 2017, according to Real Instituto Elcano.
However, Cuban officials have bigger plans. According to Diaz-Canel, the government could raise salaries and pensions for over 2 mln state employees and retirees.
Havana is also considering a fiscal stimulus to support state-owned enterprises, which could provide a broader range of goods and services to Cuban households.
“The government intends to go beyond the condemnation of the United States and become more proactive,” Cuban expert Ricardo Torres says.
Cuba’s revenues form foreign trade and tourism – particularly, from the US – have been steadily declining since 2018, after the Trump administration imposed sanctions on roughly 100 Cuban entities, restricted travel, and allowed citizens to sue Havana over their properties seized after the 1959 Socialist takeover.
It has yet to be seen how the Cuban government will finance its plans.