Cuba's economy
FT.com site
Published: Mar 02, 2008
Kremlinologists beware. There is only a handful of countries left where
outside observers can practise the arcane science of analysing regimes
where political change is mandated behind closed doors and official data
cannot be trusted. The quality of information on countries such as Cuba,
though, is so poor that such analysis often seems more of an art than a
science.
Take the size of Cuba's economy. Calculations of gross domestic product
vary significantly, from the government's official figure of $54bn in
2007 to the Economist Intelligence Unit's estimate of $45bn. The
variations are due not just to the paucity of data but also to the
authorities' decision, since 2003, to value government services at
market value, rather than at cost, as is the standard internationally.
The EIU estimates that adjusting for this makes an ***ulative 11
percentage point difference to the real GDP growth rate from 2004 to 2006.
History also suggests the value of formerly communist countries' assets
is often grossly overestimated. East Germany's economy, for example, was
considered by the United Nations to be the 10th largest in the world
before reunification. But, as historian Henrik Beringer points out, the
net value of its economic assets at reunification, initially estimated
at $1,000bn, was finally revised down to a net liability of $280bn.
In part, these difficulties reflect the challenge of choosing the right
exchange rate. Based on purchasing power parity, the CIA estimates 2007
Cuban GDP at $51bn. Where the currency would trade if the economy was
more open is debatable - Cuba already has parallel exchange rates
valuing the peso at either 0.93 or 22 to the US dollar. Based on the
latter, and using official domestic currency GDP figures, its economy is
worth $2.3bn.
This would make Cuba's economy roughly half that of Haiti, its poverty
stricken neighbour. This seems far too small. But sticklers for accuracy
will have to wait for more than Fidel Castro's exit from power.
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