Layoffs loom in Cuba's moribund economy

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Layoffs loom in Cuba's moribund economy

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Cuba has much more than an economic crisis. Its state-controlled, centrally-planned economy is frozen and badly in need of modernisation.

It can’t meet the basic needs of Cubans who must turn to the black-market where products, which are often stolen from the state, are bought and sold.

There has been a sharp fall in gross domestic product. GDP growth was 12.6 per cent in 2006 but only 1.4 per cent last year.

Facing a severe budget deficit, Havana had to cut spending on imported food and other basics by over a third in 2009, compared with the previous year.

It is also looking at slashing the number of people on the government payroll. Cuba’s workforce is 5.1 million, half of the island’s population of 11.2 million and 85 per cent of jobs are state jobs. President Raul Castro has said the number of what he called “unnecessary workers” could be over one million.

The state controls 95 per cent of the economy, making it difficult to initiate changes without major reforms moving much more towards a free-market system.

Making things worse, the sugar cane harvest this year was the worst in more than a century.

The global economic crisis has also hit tourism. Last year, the number of foreign visitors rose by three per cent but the tourism sector’s earnings fell by 10 per cent.