Despite crisis, Cuba says GDP rose 1.4 pct in '09

Despite crisis, Cuba says GDP rose 1.4 pct in '09
By WILL WEISSERT
HAVANA

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.

Despite crisis, Cuba says GDP rose 1.4 pct in '09 - BusinessWeek (21
December 2009)
http://www.businessweek.com/ap/financialnews/D9CNDOM80.htm