Judicious saving, efficient use of resources and increased foreign investments are needed to reverse economic slide when Cuba has begun 2017 with similarly tense economic challenges as it faced in early 2016.

In 2016, the country recorded its first GDP contraction in over 20 years, with the government stating on Dec. 27 that the economy had shrunk by 0.9 percent.

In a session of the Cuban parliament, President Raul Castro said this was due to the availability of currency, lower than expected export revenue and limited fuel purchases from abroad.

"Financial tensions and challenges that might intensify again in certain circumstances will persist, but we hope the GDP will grow moderately, by around 2 percent," said Castro.

However, while this tense situation will certainly impact the first months of 2017, the government is also predicting growth of around 2 percent for the year ahead.

Economy and Planning Minister Ricardo Cabrisas said apart from judicious saving and efficient use of resources, the obtaining of more foreign capital and increased investments in the short-term are also needed to achieve this objective.

Cabrisas also put the blame for the 0.9 percent contraction squarely on the U.S. embargo in place since 1962, including the fines being levied on international banks carrying out transactions in Cuba.

During the meeting, Castro accepted that the economic contraction also had to do with the deep recession in Cuba's main trading partner, Venezuela.

He expressed his dissatisfaction with the pace of foreign investment after a landmark law was passed in March 2014 to bolster foreign investment. Since then, Cuba has approved 83 foreign-financed projects worth only 1.3 billion U.S. dollars, missing the target of 2 billion dollars a year.

"We are not satisfied .... excessive delays in the negotiation process have been frequent," said the president, who called for overcoming "an obsolete mentality, filled with prejudices against foreign investment."

In 2013, Cuba inaugurated the Mariel Special Development Zone, 45 km west of Havana. But since then, only 19 projects involving foreign capital have been executed, with just 10 fully funded by international investment.

To stimulate this strategy, the government has created and updated a portfolio of opportunities in a range of sectors. It currently contains 395 projects, for a total investment value of 9.5 billion U.S. dollars.

According to official calculations, for the Cuban economy to grow at its desired rate of 7 percent, it would need 2-2.5 billion U.S. dollars in foreign investment annually. This would represent 20 percent of current GDP as opposed to the 6.5 percent it currently reaches.

The factor of the embargo also seems not to be going anyway. Despite a thaw in relations between Cuba and the United States since December 2014, the U.S. Republican-controlled Congress has refused to lift it and this looks unlikely to change in the next administration.

One positive note to end 2016, however, was that Cuba reached its annual record of 4 million foreign tourists, which has helped the tourism industry become the biggest generator of currency after professional services.

source: Xinhua