NEW YORK (AP) -- Cuba's booming tourism industry and a more diversified economy are enough to offset the worst sugar crop in perhaps a half century and the ongoing U.S. embargo of the island, the country's economics minister said Wednesday.

Jose Luis Rodriguez said a jump in the tourism, fishing, and tobacco sectors allowed the Cuban economy to grow at a 4 percent annual rate during the first three months of 1998, despite the sugar industry's woes.

"Even with the sugar drop, the economy is growing, something that was not a traditional characteristic of the Cuban economy," Rodriguez told The Associated Press, adding the government expects growth of 2.5 percent to 3.5 percent for the entire year.

Rodriguez, in New York for a meeting of the United Nations Economic and Social Council, said the next five years will bring annual growth of between 4 percent and 6 percent.

But the recovery has a long way to go: The economy shrank 35 percent between 1989 and 1994, after the collapse of the Soviet Union. Signs of decay and neglect are evident in nearly every building in the Cuban capital, Havana.

Many doctors and other professionals moonlight as cab drivers to supplement their incomes with a few precious dollars, and a majority of Cubans subsist on food rations that don't nearly cover their most basic needs.

Years of cutting immature sugar cane to meet production goals finally caught up with Cuba this year. Production is expected to fall to 3.5 tons, down from 4.6 tons in 1997, as the government allows many fields to recover. Lower international sugar prices are also taking a hit on revenue.

But Rodriguez, 52, said the Cuban economy is more diversified now. Sugar, which once accounted for more than 70 percent of export revenue, now makes up less than half.

Tourism is growing at more than a 19 percent rate and revenue reached $1.5 billion last year, up from $250 million in 1990. More than 1.1 million people mostly from Canada, Europe, and Latin America visited the island last year, Rodriguez said.

As part of the embargo, U.S. citizens are barred from spending money in Cuba, effectively blocking tourism. Some Americans travel to Cuba illegally or on special visas, but Rodriguez said the number is too small to have a significant effect on the industry.

Americans are allowed to send up to $1,200 to relatives living in Cuba, a huge amount in a country where many get by on an average monthly salary of just $10.

Many opponents of the Cuban government have criticized the remittances for boosting the economy and providing a life jacket for Cuban President Fidel Castro. Estimates of how much money reaches Cuba each year vary widely, from several hundred million dollars to $1 billion, Rodriguez said.

"The remittances are without a doubt a factor in the economy," he said, but they have not had a great impact.

He said Castro's government would welcome improved ties with the United States.

"I think relations can always get better," Rodriguez said. "It is at least in the interest of Cuba to normalize relations with the United States."

But he added he isn't optimistic that there will be a softening of the U.S. stance toward the communist nation.

"We don't include in our economic projections any chance that the embargo could be lifted," Rodriguez said.

He said the economy will continue to recover regardless of U.S. action: "We can advance, but logically, not without difficulty."