Cuban economy decreases and expects to grow: still unstable

The meager GDP growth in 2014 with the expectation of a significant leap for 2015, plus announcements of upcoming investments with greater impact on the national economy and measures that touch the serious housing problem, were central themes of the Council of Ministers meeting on Friday in Havana.

The government placed GDP by 2014 in 1.3% of, a figure lower than the estimated 2.2 foreseen, and even lower than in 2009 (1.4%) when Cuba was hit by three hurricanes that caused huge losses, is the expected to close this year. This year adds to a steady slowdown since 2008 that has kept the Cuban GDP plummeting.

Recently, the Ministry of Finance and Prices, ruler of the country’s economy, lived an unusual fact in Cuban politics. Marino Murillo Jorge, its minister between 2009 and 2011, returned to his former position displacing Adel Yzquierdo -previous deputy, then minister and deputy minister again. Murillo maintained his position as head of the Commission for Implementation and Development (responsible for the changes promoted by the government of Raúl Castro) and now holds two key positions in the national economy.

In the meeting, Murillo said that “by 2015 GDP will increase slightly over 4%, whereby the above rates and moderate slowing trend of recent years are reversed,” according to the newspaper official Granma.

This growth, according to data provided by the newspaper, may be influenced by an increase in investments for the year, forecast at “7.159 billion pesos, up to a billion 595 million estimated for execution of 2014″ and with a breakdown of 57.1% for productive areas and 17.7% for infrastructure.

In addition, Granma said, the growth is expected in sectors such “manufacturing, construction, trade, agriculture, livestock and forestry”, which can translate into a significant boost to the primary and secondary sectors of Cuban economy, now badly damaged and dependents

The budget deficit in 2014, according to the Minister of Finance and Prices Lina Pedraza, was 3.4 billion pesos, 12.4% lower than forecast in the Budget Act for the year, but is expected to increase in 2015 up to 5.63 million pesos, because the costs will increase by 10%, and revenue will only grow by 6%.

Cuba began this year to finance its budget deficit with sovereign bonds, whose repayment is 10 years and an average interest rate of 2.5 percent annually, explained the Minister in July, before the National Assembly of People’s Power. Till 2013, 50% of the deficit was financed by printing money.

Pedraza informed the Council of Ministers, moreover, that “according to the timetable for implementation of the Tax Act in 2015 a 2% tax will be applied on wholesale sales and Land Tax for Local Development will be extended to all municipalities.”

The proposed “Conceptualization of the Cuban Economic and Social Model of Socialist Development” according to Murillo Jorge, continues to be prepared.

Finally, the Cabinet approved measures to “be giving solutions” to the problem of housing in the country.

Among them are expected to modify the regulation that covers the provision of subsidies to individuals for construction materials, explained Leonardo Andollo, deputy chief of the Commission for Implementation and Development, and that includes, according to Granma, performing two calls a year, at least, for receiving subsidies. At every moment, data, they say, should be made public.

Another measure will recognize the perpetual leasehold to those affected by weather events and today build on authorized sites, which will benefit about 20,000 people.

And a measure that may impact heavily on the Cuban real estate market will be the adoption of a “new reference value relative to the market to apply to the transmission housing by gift and purchase” although the 4% tax  is maintained.

After three years of relaxed housing transmission in Cuba and after ignoring abysmally the existence of market prices in the country, the government will increase the paltry rates that it had established, according to Granma, due to underreporting of tax and masking of the purchases and sales with donations.

 

 

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