Cuban Economy Heating Up; Posts 4 Percent Growth for First Half of 2015

Raul Castro’s Cuba has made many changes in recent years, and some of these seem to be paying off for the economy. After more than five decades of limited diplomatic relations with the US, the island nation just south of Florida has finally begun to work on restoring official channels of communication. Castro has also allowed a limited opening of the Cuban economy to private interests while also trying to attract foreign investments.

Raul Castro’s Cuba has made many changes in recent years, and some of these seem to be paying off for the economy. After more than five decades of limited diplomatic relations with the US, the island nation just south of Florida has finally begun to work on restoring official channels of communication. Castro has also allowed a limited opening of the Cuban economy to private interests while also trying to attract foreign investments.

The results: according to Cuban government figures reported by Fox News Latino, Cuba’s gross domestic product (GDP) grew about 4 percent in the first half of 2015. Economy and Planning Minister Marino Murillo told the Council of Ministers during a meeting last Friday that, “the economy has a good rate of growth. We have the conditions to finish the year in good shape, but we have to keep working hard.” The government wanted to achieve this 4 percent GDP growth rate after a disappointing showing in 2014 left the nation with a mere 1.3 percent growth, falling nearly a full point short of the government’s initial goals.

All sectors of the Cuban economy grew between January and June 2015, according to the government report. Particular industry standouts included sugar, manufacturing, construction, and trade. On the other hand, transportation, warehouse, and communications showed more lackluster performance. Moreover, some agricultural products suffered instability due to production problems, resulting in the government spending $40 million to purchase these products. Most affected by the agricultural bailout were cheese, chicken, cold cuts, ground beef, and sausages.

Overall, foreign trade helped bridge the gap in Cuba’s growth from last year to this one. However, while the overall trade balance shifted in Cuba’s favor, Murillo cautioned that there are “tensions in the external finances.”

The second half of the year looks equally rosy for Cuba. Most of the government’s internal investments should take place in the second half of the year. However, to spur growth the government has been operating at a deficit. The current deficit should be equivalent to about 4.2 percent of GDP, according to government estimates. However, some fear that there may be a shortfall in the budget for this year already, based on the planned spending for the end of the year. Nevertheless, the government estimates growth might continue through the end of the year at a rate sufficient to offset much of the deficit spending.