HAVANA — Cuba will have an inflation rate of over 70 percent by the end of 2021, Economy Minister Alejandro Gil said on Tuesday.
Cuba’s economy shrank 10.9 percent in 2020 as the coronavirus pandemic devastated the country’s tourism sector. This was further aggravated by harsh new sanctions imposed by the United States during the presidency of Donald Trump that withered foreign exchange.
Communist-run Cuba said it will move to control soaring prices and ease shortages as recovery from a pandemic-driven recession takes root, Gil told a year-end session of the National Assembly on Tuesday.
Officials expect it to recoup just two percent in 2021.
What did Gil say?
Gil said “restoring the peso’s value and role in the economy” would be vital to reaching four percent growth next year.
“In 2022, we will gradually advance in eliminating inflation,” he said.
The U.S. dollar has soared on Cuba’s black market to around 75 pesos, far beyond the official exchange rate of 24 pesos. The peso collapsed this year after Cuba discontinued the convertible peso and its dual-currency system.
Previously, the Cuban peso had been for domestic use and the value of the convertible peso was tied to that of the U.S. dollar.
Reuters cited independent economists charged with investigating as estimating that the real rate of inflation could be anywhere between 100 percent and 500 percent. Pavel Vidal, a former economist of Cuba’s central bank, told Reuters that the true inflation had largely been occurring in private and informal markets that aren’t properly accounted for by government statistics.
One key issue, said Gil, was inflation, which Cuba’s government pegs at 70 percent but experts say is much higher.
Gil said hiking salaries would only increase the inflationary spiral and Cuba could not import cheap goods to buy its way out of the crisis because it does not have the hard currency to do so.
Instead, he said, measures adopted this year that would boost growth and increase domestic production, such as granting greater autonomy to state businesses and legalization of small and medium-sized private ones, would help keep prices down for Cubans already suffering shortages.
Orlando, the owner of a hamburger joint in Havana, told Reuters soaring costs for raw materials had pushed his prices through the roof.
“I sold a pork burger for 25 pesos last year, now it is 85,” he said, asking to be identified only by his first name.
Pavel Vidal, a former economist at Cuba’s central bank, said the government was using an outdated model to calculate its consumer price index that didn’t properly account for the growing private sector and informal markets.
“It underestimates the true inflation that has largely been occurring in private and informal markets,” he said, adding consumer prices had “for certain” seen a triple-digit rise.
The reports of three economists surveyed by Reuters estimated inflation in a range between 100 percent and 500 percent.
“This coincides with the anecdotal information that indicates that prices of the products on average have gone up between 4 and 8 times,” Vidal said.
—REUTERS
Reporting by Marc Frank, editing by Dave Sherwood and Sonya Hepinstall
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