The Cuban economy has remained stagnant for the last 38 years, while official inflation surpassed 400% in 2021 and continued to rise in 2022. The Díaz-Canel dictatorship has no answer to the sharp collapse of the island’s standard of living.
The Cuban Marxist regime officially confirmed that the country recorded a growth of just 2% until the end of 2022, after having risen by 1.3% in the previous year. For a country with Cuba’s level of poverty, these results are extremely meager, and they are numbers that have not been able to compensate for the brutal collapse of activity of 10.9% in 2020 and the incipient drop of 0.2% in 2019.
Cuba once again lost its economy’s long-term growth trend, having done so several times since the beginning of the so-called “special period” in the 1990s.
The country has accumulated practically no growth in the last 38 years. Per capita income in Cuba not only remains at lagging levels compared to many countries in the region, but is also stagnant at the level it was in the 1980s.
As if all this were not enough, the collapse in the level of activity occurred at the same time that prices were the protagonists of the most violent outbreak in the history of Cuba.
The dictatorship recognizes that the GDP deflator went up to 401.6% in 2021, a metric that collects the evolution of the general price level for the entire economy (and not just a basket like the CPI).
Until the year 2022, the “official” inflation of prices strictly controlled by the regime exceeded 40% in November last year, but episodes of shortages meant that official prices ended up disappearing along with the goods on the shelves of state shops, therefore actual inflation in shadow markets was much higher.
Economist Steve Hanke estimates that prices would have skyrocketed by up to 130% in 2022 alone, and it is estimated that the GDP deflator index will yield a similar metric on the numbers accumulated in that year.
Historical evolution of GDP and inflation in Cuba.
The socialist system entered a crisis when the Miguel Díaz-Canel government incurred significant fiscal imbalances in 2020 (a deficit of almost 18 points of GDP), in addition to the high deficits that remained in previous years. Cuba recorded an imbalance that averaged 5% of GDP between 2008 and 2019, and in 2021 it rose to 11.7% of the product.
The only viable alternative to finance imbalances was monetization. The Government unified the exchange market (with strong control over access to foreign currency), eliminated the convertible peso (CUC) linked to tourist services and generalized the current peso to the bulk of the country’s transactions, a currency without value and support.
The result was a violent inflationary explosion, followed by shortages after the entrenchment of numerous price and quantity controls across the island. None of these police methods managed to give concrete results for the stabilization of the country.