Cuba's economy to falter in 2009 - Cuban experts

Cuba's economy to falter in 2009 - Cuban experts
Mon May 18, 2009 2:23pm EDT
By Marc Frank

HAVANA, May 18 (Reuters) - A Cuban university think-tank said on Monday
Cuba's economy would grow only slightly or shrink in 2009 as the
island's financial problems persist against the backdrop of a global
downturn.

The forecast followed increasingly strident warnings in recent weeks in
Cuba's state-run media that Cubans must tighten their belts and work
harder to confront the impact of the international financial crisis.

"Our forecast (for 2009) is for growth to be around 1 percent," said an
economist at the Center for the Study of the Cuban Economy who requested
anonymity.

"But it could fall anywhere between a range of negative 0.5 percent and
positive 2.5 percent," he said.

Unlike other economic think-tanks which depend on government ministries
in the communist-run nation, the Center for the Study of the Cuban
Economy is attached to Havana University.

The forecast by the center, whose projections have been more accurate
than those of the government in recent years, was the latest sign that
after four years of strong growth the Cuban economy was in serious decline.

Foreign businessmen and diplomats have been complaining they are not
getting paid by the Cuban government, while banks have warned they have
very little foreign exchange in hand.

On Monday, the ruling Communist Party's newspaper, Granma, repeated
warnings that Cubans were using too much energy and that electricity
blackouts to cut consumption were imminent.

"The spendthrift mentality that persists in many of us, as if nothing
was happening around us, has become more intolerable in these moments,"
it said in an editorial.

Cuba's government has projected growth of 6 percent this year but
cautioned that the international climate was too unstable to make a
solid prediction.

EXTERNAL, INTERNAL FACTORS

Last year, Cuba's economy, as measured by the gross domestic product,
grew 4.3 percent, less than the study center's forecast of 5.1 percent
and well below the government's original prediction of 8 percent.

In 2007, the center said growth would be 8 percent, compared with the
government's 10 percent, and in the end GDP increased 7.3 percent.

Pavel Vidal, an economist at the center, recently wrote in an article
for International Press Service that growth would be down this year due
to both external and internal factors.

He said Cuba would continue to suffer the effects of last year's
dramatic increase in the trade deficit, which rose 70 percent due to
high prices for imports and low prices for nickel, Cuba's main export.

While Cuba's difficulties were compounded by the global financial crisis
and three hurricanes that caused widespread damage, he said Cuba also
suffered from low productivity and little diversification of exports.

Cuba has greatly increased "service exports," especially to Venezuela
where thousands of doctors and other personnel are working, but the
income has little multiplying effect inside the island, he wrote.

In 1991, the collapse of the Soviet Union, Cuba's biggest benefactor at
the time, cut off Soviet subsidies to the island and sent the Cuban
economy into a tailspin from which it took years to recover. Electricity
blackouts were common then. (Editing by Jeff Franks and Cynthia Osterman)

Cuba's economy to falter in 2009 -Cuban experts | Markets | Markets News
| Reuters (19 May 2009)

http://www.reuters.com/article/marketsNews/idUSN1834071920090518?sp=true