HAVANA, (Reuters) – Cuba’s economy grew less than expected in the first half of 2018 and an ongoing liquidity crisis will force fresh belt tightening, President Miguel Diaz-Canel said yesterday.
Diaz-Canel, who replaced former President Raul Castro in April, was addressing lawmakers at a national assembly meeting after they debated and then approved a revamping of the constitution. The new constitution seeks to maintain Cuba’s one-party socialist system but institute a major government reorganization and pave the way for recognition of private businesses and lesbian, gay, bisexual and transgender rights. It will now be publicly debated through November before submission to a referendum.
The government is also attempting to make changes to its Soviet-style command economy, with the goal of creating “prosperous and sustainable” socialism. Since oil prices crashed in 2014 and Venezuela, the country’s closest ally and main economic partner and fuel supplier, began to struggle, foreign currency revenues and oil supplies have steadily fallen, forcing cuts in imports and energy use.
The economy grew 1.1 percent during the first half, Diaz-Canel said, compared with the 2 percent forecast by the government for 2018 and 1.6 percent growth last year.
The Cuban government has said it needs up to 7 percent annual growth to fully recover and develop from the collapse of former benefactor the Soviet Union, and more recently the crisis in Venezuela.
The drop in revenues has led Cuba to postpone payments to many suppliers and joint venture partners over the last two years, the government has admitted.
Diaz-Canel yesterday called on the country to work harder to improve the economy and “gradually re-establish the financial credibility of the nation.” Cuban economists estimate the country needs up to 3 percent annual growth to break even.
“The financial situation remains tense … forcing adoption of additional measures to control resources in the second half,” Diaz-Canel said, citing bad weather and a drop in tourism and other export earnings.
The Cuban president also called on the government and population to crack down on black market activity.
The government last week released new rules for private taxis aimed at forcing an end to their open use of black market fuel and recently raided various state retail outlets in a crackdown on the diversion of goods to the underground.