Cuba sees economy shrink 1 percent despite detente with US

Cuba's President Raul Castro addresses the National Assembly in Havana, Cuba, Tuesday, Dec. 27, 2016. (Ladyrene Perez, Cubadebate via AP)
Cuba's President Raul Castro, front left, and Vice President Miguel Diaz-Canel, front right, attend the biannual legislative session at the National Assembly in Havana, Cuba, Tuesday, Dec. 27, 2016. (Ladyrene Perez, Cubadebate via AP)
Members of the National Assembly meet for their biannual legislative session, in Havana, Cuba, Tuesday, Dec. 27, 2016. (Ladyrene Perez, Cubadebate via AP)
Cuba's President Raul Castro, front left, and Vice President Miguel Diaz-Canel, front right, attend the biannual legislative session at the National Assembly in Havana, Cuba, Tuesday, Dec. 27, 2016. (Ladyrene Perez, Cubadebate via AP)

HAVANA — Cuba announced Tuesday that its economy shrank this year for the first time in nearly a quarter century as a plunge in aid from Venezuela overwhelmed a surge in tourism set off by detente with the United States.

Economy Minister Ricardo Cabrisas and President Raul Castro told Parliament that the island's gross domestic product fell nearly 1 percent after seeing average annual growth rate of nearly 3 percent in 2011-2015.

Cabrisas blamed the slump on Venezuela's troubles and a decrease in revenue from Cuba's few exports, which include sugar, refined gasoline and nickel, whose price has dropped in recent years.

"In spite of the drop in GDP, the free social services that our population enjoys have been preserved, defying predictions that the Cuban economy would collapse and upsetting blackouts would return," Castro said.

The two men spoke to Cuba's rubber-stamp National Assembly, which also passed a law announced by Castro last month banning public memorials to his brother Fidel, the revolutionary leader who died on Nov. 25 at age 90.

The last time official figures showed a fall in Cuba's gross domestic product was in 1993 after the Soviet Union collapsed, abruptly stripping away much of the island's aid and trade.

A global drop in petroleum prices has slammed Venezuela's oil-dependent economy, forcing it to reduce shipments of heavily subsidized crude oil to Cuba, with exports dropping from 115,000 barrels daily in 2008 to 90,000 in recent years to 40,000 in the past few months.

In addition, the number of contracts for Cuban professional services with Venezuela has dwindled and some payments have not been made, Cabrisas said. A large number of Cuban doctors have long traveled to Venezuela, with their salaries going directly to Cuba's government.

"This confirms what we had said about Venezuela's situation leading to a recession," Cuban economist Pavel Vidal, a professor at a university in Colombia, told The Associated Press.

Cabrisas, whose speech was partially transmitted on public TV, also blamed the economic slump on U.S. sanctions on Cuba, with officials previously saying that the 55-year-old embargo has cost the island $125.9 billion, including $4.6 billion last year.

Tourism, however, has been thriving since U.S. President Barack Obama ordered the restoration of diplomatic relations between Washington and Havana two years ago. Overall visitor numbers rose more than 15 percent in 2015 and again this year.

Cabrisas said he expects the island's gross domestic product to grow 2 percent next year if the government cuts costs, increases exports and finds alternatives for certain imports.

Vidal said he was surprised by the prediction.

"They're thinking things are going to improve in Venezuela," he said. "And they're relying on fiscal spending without backing from revenue."

Other economic experts told The Associated Press that possible solutions could include boosting the private sector and deregulating portions of the public sector, excluding areas such as health or education.

___

Andrea Rodriguez on Twitter: https://twitter.com/ARodriguezAP

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