Cuba says economy shrank this year in tandem with Venezuela crisis

HAVANA, Rabi’I 29, 1438, December 28, 2016, SPA — Cuba’s economy shrank 0.9 percent this year in tandem with the crisis in its key trading partner Venezuela, President Raul Castro told the National Assembly on Tuesday in a closed-door speech, predicting a slightly brighter outlook for 2017, according to Reuters.
The figure suggests the economy contracted sharply in the second half after the cash-strapped government drastically cut imports, investment and fuel in response to lower exports and a drop in cheap oil deliveries from Venezuela. It had reported 1 percent growth for the first half.
“Restrictions in cash and in the provision of fuel worsened in the second half,” Castro said, according to excerpts published by official media outlet Cubadebate.
“Financial tensions and challenges that might intensify again in certain circumstances will persist, but we hope that gross domestic product will grow moderately, by around 2 percent (in 2017).”
Cuba’s centrally planned economy has struggled for decades with the U.S. economic embargo and mismanagement at home.
Market-style reforms and, more recently, a detente with the United States that has boosted remittances and the tourism sector, helped the economy grow on average at close to 3 percent each year between 2011 and 2015.
Still, the long slump in global fuel prices is hurting many of Cuba’s top trading partners such as Angola, Venezuela and Brazil, and revenue from the sale of professional services to those countries has dropped.
Key ally Venezuela has also slashed its provision of cheap oil and the drop in global commodities prices is punishing Cuban exports of nickel, refined oil products and sugar.
Some experts fear that, going forward, growth from thawing relations with the United States may also be at risk since Republican Donald Trump’s victory in the U.S. presidential election.
Trump, who takes office Jan. 20, has vowed to “terminate” President Barack Obama’s engagement with Cuba unless Havana gives the United States what he calls a “better deal.”
According to the excerpts of his speech that were published, Castro did not comment on the future of Cuban-U.S. relations, except to recall the negative impact of the embargo.
The president, who has promised economic reforms, did say foreign investment is one area that could be improved upon.
Since approving a law to bolster foreign investment more than two years ago, Cuba has approved just $1.3 billion worth of projects. It aims to take in $2 billion annually, making investment an important growth driver.
Castro said it was necessary to “overcome the obsolete mentality, full of prejudices towards foreign investment.” “We are not going towards capitalism, but we cannot be afraid of, or put obstacles in the way of, that which we can do within our laws,” he said, adding that investment in the energy sector was key.
00:20 LOCAL TIME 21:20 GMT