Cuba's crumbling economy to shrink further: minister

HAVANA

Cuba's government is expecting the economy to shrink up to two percent in 2023, as the country is gripped by its worst economic crisis in decades that has prompted a record exodus from the island.

"It is possible that this year we have a contraction that could be to the order of two percent," Economy Minister Alejandro Gil told parliament. 

Cuba's economy grew only 1.8 percent in 2022 after struggling to recover from a 10.9 percent contraction in 2020 due to the COVID-19 pandemic which hit the vital tourism sector hard.

The pandemic and a tightening of U.S. sanctions in 2021, combined with structural weaknesses, have sent the economy into a tailspin.

Gil highlighted the "strong limitations" that Cuba - under a U.S. embargo since 1962 - faces in terms of the availability of foreign currencies and fuel.

He predicted inflation of 30 percent in 2023, compared to 39 percent in 2022.

Economists estimate real inflation has reached triple-digit figures in recent years, as the price of the dollar continues to rise against the Cuban peso on the informal market to more than double the official rate.

In 2021, a monetary reform phasing out a convertible peso pegged to the dollar, led the regular peso's value to plummet.

Prime Minister Manuel Marrero told parliament a "working group" would determine "what the exchange rate should be against the dollar."

Gil said agricultural production and the manufacturing industry were in particular in decline, while mass emigration of workers was fueling a "complex scenario."

Tourism recovered somewhat as the island nation welcomed 2.4 million travelers in 2023, double the amount that came the previous year.

However, this is far less than the 3.5 million who had been expected.