May 18, 2009 / 6:28 PM / 10 years ago

Cuba's economy to falter in 2009 -Cuban experts

* Cuban economy seen growing little, may shrink in 2009

* Global crisis, storms, low productivity hurt economy

* Government warns of blackouts to curb energy use

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.


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)

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