Cuba's Castro warns world economy may slow reform

By Marc Frank

HAVANA (Reuters) - Cuban President Raul Castro moved to dampen rising expectations on Friday, warning that global economic problems may slow increases in worker pay, one of the key economic reforms he has proposed since taking office.

In a speech to the first National Assembly meeting since it elected him to succeed ailing brother Fidel Castro in February, Castro said he wanted to move faster to improve the daily lives of Cubans but that rising prices and a slowing economy forced him to be realistic.

Castro, 77, has raised hopes for change by taking steps to modernize Cuba's state-run economy that included removing salary caps and increasing economic incentives for workers to be more productive.

Earning more money is viewed as an urgent need by most Cubans, who receive several social benefits, but on average earn less than $20 a day.

Castro said "the salary problem" was being studied and would be addressed "gradually and according to priorities" but that quick action may not be possible.

"It will depend on the economic situation of the country, inevitably linked to crisis in the world today, which could worsen," he said. "It wouldn't be ethical to create false expectations.

"We would like to go more rapidly, but it's necessary to act realistically," he said.

Castro's reforms have included decentralization of agriculture to increase food production, allowing Cubans to buy cell phones and computers and opening up tourist facilities previously off-limits to Cubans.

He sat next to an empty chair reserved for Fidel Castro, who has not appeared in public since he provisionally ceded power to his brother after intestinal surgery for an undisclosed illness in July 2006.

Fidel Castro, 81, took power in a 1959 revolution and remains a deputy in the National Assembly, which keeps his chair open, awaiting his return.

BELT-TIGHTENING

Raul Castro's speech was preceded this week by National Assembly meetings in which government officials warned that belt-tightening would be needed due to rising prices for fuel and imports.

They also said the government would decentralize a sagging construction sector to make it more efficient and consider raising the retirement age to help Cuba cope with an aging population.

The proposal would gradually raise the retirement age to 65 from 60 for men and to 60 from 55 for women, but is not expected to be approved until the assembly meets again in December.

Castro, who wore a traditional white guayabera shirt to address the assembly, said the change was needed to maintain the work force as Cuba ages.