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Cuba lowers economic growth forecast as trade continues to drop

Reuters  |  HAVANA 

By Marc Frank

(Reuters) - Communist-run Cuba's economic growth will come in at around 1 percent this year, compared with the 2 percent previously forecast, due to a fall in exports and tourism revenue, state-run media reported over the weekend.

The island's grew 1.8 percent last year and 0.5 percent in 2016.

Economy and Fernandez reportedly told a council of ministers meeting that the lowered GDP growth forecast for this year was due to "less than expected revenues from activities such as tourism, the harvest (sugar) and (nickel)," three key revenue sources for

Gil said austerity measures, which began in 2016, would continue into 2019. They include cuts in and fuel to state companies and reduced imports of consumer goods and inputs for the economy.

Cuba's economy is notoriously inefficient and dependent on foreign revenues. The government also spends a large amount of its revenue on the country's free healthcare system, education and other services.

The is also tightening sanctions on that have been in place for more than a half a century and which were loosened a bit under former U.S.

Some economists have estimated that Cuba's import dependence is as much as 17 cents for every dollar of product produced.

Cuba's GDP fell 35 percent in the 1990s after the fall of the Soviet Union, which supported the country financially during the Cold War.

The rise of and his Venezuelan socialist revolution led to a partial revival of the Cuban economy as Venezuelan was sold to at favorable terms and sent doctors and other goods to its ally. But the trade relationship has deteriorated due to Venezuela's economic crisis and declining exports.

Cuba's export revenues have declined every year since 2014, even as debt payments mounted, offset somewhat by increased revenues from and remittances, though those earnings are treated as state secrets.

Combined exports and imports fell around 25 percent from 2013 through 2017, with imports dropping to $11.3 billion from $15.6 billion during that period, according to the government.

In August, the government slapped a hold on already approved "non-essential" imports.

Pavel Vidal, a former who currently teaches at the in Colombia, said the country was piling up budget deficits to keep the economy growing. Cuba's budget deficit reached 8 billion pesos last year, nearly 9 percent of its GDP, Vidal said.

"This helps stimulate growth, but by accumulating a financial bubble in the form of public bonds in the hands of state banks," he said. "It can't go on forever."

(Reporting by Marc Frank; Editing by Paul Simao)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sun, November 04 2018. 23:13 IST