Tags: Cuba | says | Economy | Rose | Crisis

Cuba: Economy Rose 1.4 Percent Amid Crisis

Monday, 21 Dec 2009 01:55 PM

Cuba used its unique brand of state accounting Sunday to claim 1.4 percent economic growth for the year, avoiding an official recession but failing to meet original forecasts by more than two-thirds.

It's a steep decline for a country that posted a 12.5 percent official growth rate as recently as 2006 and had expected gross domestic product to expand by 6 percent in 2009.

Still, Economy Minister Jorge Murillo branded the result "a moral victory" and told a session of Cuba's rubber-stamp parliament to expect another, saying officials project GDP to grow 1.9 percent in 2010 — despite a worldwide recession that communist Cuba blames on global capitalism and free-market-friendly policies.

President Raul Castro was less optimistic, predicting in a speech later that "next year will be difficult and we will maintain the financial restrictions derived from the crisis."

He said that to generate revenue, the government would levy taxes on agricultural producers — presumably those working privately and not for the state. "Taxes are a tool that we have to get used to in very little time," he said.

When calculating growth, Cuba's government includes what it spends on free health care and education through college, as well as subsidies for housing, transportation and food rations. Critics say that exaggerates the economy's output.

The economy was hit hard by the recession this year, with productivity declining 1.1 percent, exports falling 22 percent, and officials slashing foreign imports 37 percent.

Murillo said Cuba simply could not afford more imports — despite the government's long-standing complaint that the 48-year-old U.S. embargo keeps the island from purchasing vital American goods and causing shortages of everything from basic food to car parts to school supplies.

"Since the end of last year, we have seen a marked deceleration in the flow of hard currency," Cuba's top economic official said. "Because of that, it has been difficult to meet our obligations and external payments."

Murillo said the government is renegotiating its debts to foreign countries as well as what it owes to multinational firms operating on the island — hundreds of which have complained that Cuba has stopped paying them while also restricting the amount of money they are able to withdraw from their bank accounts on the island.

Cuba's parliament convenes for full sessions just two days a year and, as he did during its meeting in July, Castro promised more cuts in health care and education — the building blocs of the island's communist system.

He gave no details, but said "we are sure that, without affecting the quality of health and education ... it's possible to reduce costs by a noticeable amount."

Murillo said Cuba did not adequately prepare for the fluctuating price of nickel, its chief export, and added that tourism failed to generate as much revenue as hoped even though Cuba is on pace to break last year's record of more than 2.4 million annual visitors.

Meanwhile, Osvaldo Martinez, head of parliament's economic affairs commission, blamed falling national productivity on an excess of Cuban employees who have jobs but do too little work — a long officially sanctioned practice that allows the country to claim an official unemployment rate of under 2 percent.

It's "an old problem of superfluous jobs and an excess of positions in many of the country's activities," Martinez said.

The government dominates well over 90 percent of the economy and pays state employees an average of less than $20 a month, making it easy for most sectors to take on far more employees than needed.

Without releasing specific figures, Murillo said Cuba spent nearly 5 percent more than it took in this year. That was better news than in 2008, when the island ran up a 6.7 percent deficit.

Cuba's weak economy has been kept afloat in recent years by Venezuelan President Hugo Chavez, who sends more than 100,000 barrels of oil a day in exchange for social services, including Cuban doctors who provide free medical care in Chavez' South American country.

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Cuba used its unique brand of state accounting Sunday to claim 1.4 percent economic growth for the year, avoiding an official recession but failing to meet original forecasts by more than two-thirds. It's a steep decline for a country that posted a 12.5 percent official...
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Monday, 21 Dec 2009 01:55 PM
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