DEVELOPMENT-CUBA: Economy Up Depite Falling GDP

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Nov 22 1997 (IPS) - Official forecasts expect 2.5 percent economic growth in Cuba this year, despite a disheartening drop in Gross Domestic Produc (GDP) threatening a backslide on the path out of seven years of crisis.

“The tendency towards recovery will be maintained for the next few years,” said Cuban Vicepresident Carlos Lage to a meeting of presidents and high-ranking Latin American and Caribbean Central Bank officials.

The meeting, held behind closed doors and ending Tuesday, aimed for an exchange of experiences to boost development of the Central Bank of Cuba, a new entity established this year.

Lage, considered one of the mentors of the economic policy of this socialist country, told the executives of eleven regional banks Cuba had started on the road to recovery and “had created the conditions necessary to maintain” this tendency.

The 2.5 percent growth, close to the average for Latin America, provides a harsh contrast with last year’s 7.8 percent.

Experts classed the reduction in GDP this year as “severe,” explaining meanwhile that the initial surge on the road to recovery is almost impossible to maintain, and that the initial high growth rates are bound to fall.

Cuba saw a fall of 34.8 percent in GDP between 1989 and 1993. The economic recovery started to be seen in 1994 with growth of 0.7 percent, continued with 2.5 percent in 1995 and peaked at 7.8 percetlast year.

The Cuban vicepresident attributed the economic pick-up to sustained growth in the tourist industry, at an average of 20 percent in the last five years.

Sources in the Ministry of Tourism said that this weekend, the amount of visitors to Cuba had tipped the million point, a level it reached for the first time in December last year, with a total of 1,004,436 tourists.

A report presented to the Fifth Cuban Communist Party congress by Lage in October stated that for this year, national productions for tourism and the internal hard currency market will grow 60 percent.

According to official forecasts, light industry will be up 4.1 percent, food by six percent, building materials 10 percent, and the steel industry 17 percent.

Amongst the main Cuban export products, nickel will rise to 60,000 tons, tobacco will reach the production of a million cigars, with income up 66 percent, and the gross fish catches will climb 17 percent.

Francisco Soberon, minister in charge of Cuba’s Central Bank, said Monday this year would end with unemployment of seven perent, inflation of no more than 2.5 percent, and a fiscal deficit below two percent of the GDP.

Only sugar, considered the main traditional Cuban export, appears to have resisted recoery showing a fall this year, the true value of which has not been revealed by the authorities.

Cuba, one of the top ten world sugar producers, saw a fall in average annual production from 7 million tons last decade, to 3.3 million in 1995.

The industry appeared to recover a year later, when an injection of external funds led to production of 4.45 million tons, and forecasts for this year ranging from 4.5 to 5 million tons.

Local experts estimated the harvest could have been only some 4.2 million tons due to the combination of the late arrival of loans, the suspension of some credit lines, internal inefficiencies and climatic influences.

According to Lage, the lack of funding could be considered the main stumbling block for the Cuban economy as, he said, the island had no access to long-term credit and the short-term loans it does get have onerous repayment conditions.

In his opinion, one of the most negative effects of the US Helms- Burton Law toughening the blockade on Cuba, was closing the island’s access to foreign funding.

“The legislation causes damage by intimidation, more than the action on any particular company,” said Lage.

Official sources stressed that no foreign businesses had withdrawn from Cuba as a consequence of the punishments planned in the Helms-Burton Law, but they recognised it had slowed the rate of investment.

The Helms-Burton Law, signed by Bill Clinton on March 12, last year, includes sanctions against entrepreneurs from third countries dealing with companies expropriated from US citizens by the Cuban government.

Lage recognised on an internal front, the Cuban economy must continue the process of change in state concerns, especially the sugar industry, in pursuit of greater efficiency.

If the “reactivation” of the sugar industry is not achieved “we cannot talk of economic recovery,” he warned, adding that the authorities were, however, optimistic on this front.

Meanwhile, authorities in the sugar sector said systematic growth in the sugar sector could not reasonably be expected until around the year 2000, two years into the 1998-2002 five year development programme.