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Detente with the United States appears to have helped Cuba's communist economy, which officials expect to grow 4 percent in the first half of 2015, in line with official forecasts. Economy Minister Marino Murrillo delivered an update on the economy to the cabinet on Friday that was covered in official media on Monday, attributing growth to better sugar production, manufacturing, construction and trade.
Gross domestic product (GDP) growth was up from 1.3 percent, the latest official estimate for all of 2014. In December, Cuba aggressively forecast 4 percent growth for 2015 just days after announcing detente with the United States, apparently banking on ongoing market-oriented reforms and improved relations with its longtime nemesis. "While Cuban economic methodology is different from ours, these numbers would seem consistent with anecdotal evidence," said Pedro Freyre, who chairs the international practice at the US-based Ackerman law firm. "The sheer number of US travellers to the island alone have had an obvious positive impact."
Cuba previously announced tourism, the country's second-largest industry, was up 15 percent over the first four months of the year versus the same period of 2014. Three million visitors arrived in Cuba in 2014, including 100,000 Americans and 350,000 Cuban-Americans. Leisure travel is still banned for Americans but US President Barack Obama in January eased restrictions on sanctioned visits such as cultural and religious exchanges.
Experts expect the number of Americans visiting Cuba this year to increase more than 50 percent. The latest sugar harvest increased 18 percent and overall agriculture was up 13 percent over the first three months of the year, Cuba has said. However, transportation, warehousing and communications were falling short of expectations this year, Murrillo told the cabinet, the official daily Granma reported. The first-half trade balance remained positive, the report said, without providing further details.
President Raul Castro introduced market-oriented reforms after replacing his ailing brother Fidel in 2008, such as leasing fallow land, introducing market mechanisms into all agricultural endeavours, opening up space for small private businesses and improving tax and other incentives for foreign investors. Nevertheless, the rate of growth declined for the last three years. "The growth in tourism was a predictable result of better US-Cuban relations, but the improvement in these other sectors comes as a surprise," said William LeoGrande, a professor of government at American University. "It may signal that the 'updating' of the economy is finally producing tangible results," he said.

Copyright Reuters, 2015

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