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Country Forecast Cuba February 2012 Updater

  • Publication Date:February 2012
  • Publisher:EIU
  • Product Type: Report
  • Pages:16

Country Forecast Cuba February 2012 Updater

Overview

A change of leadership within the forecast period is highly likely. Although the Economist Intelligence Unit expects the transfer of power to be relatively smooth, there is no obvious candidate for the presidency among the younger generation of politicians. Even though the global outlook for 2012 is gloomy, we do not expect nickel prices (the main source of foreign exchange) to drop as sharply as in 2008-09, thereby avoiding the need for dramatic adjustment measures. The economic reform process will remain uneven and some vital measures (such as improving credit provision) will lag, but we nevertheless expect an expanded scope for private enterprise and foreign investment. Given the huge scope for catch-up, GDP growth will be relatively low in 2012, at 3.3%. But growth is expected to pick up to around 4-5% annually in 2013-16. Inflation will peak in 2013, assuming that the basket of goods begins to change as price subsidies are scaled back. Rising competition and output should help to reduce inflation thereafter, to 4.4% by end-2016.

Key changes from last month

Political outlook

Thousands of meetings organised by the Partido Comunista de Cuba (PCC) and other official groups have been held to consider a document that will guide discussions at the forthcoming PCC Conference at the end of January.

Economic policy outlook

The government nearly met its 2011 fiscal deficit of 3.7% of GDP, with the actual outturn coming in at 3.8% of GDP. Revenue growth was weak, but the government kept spending on a tight rein to compensate. This trend seems set to continue in 2012.

Economic forecast

Following signs that the current account ended 2011 in surplus, we have altered our forecast for 2012-16 from a small deficit to a small surplus, on the assumption that the authorities are seeking to build reseves to support a process of eventual exchange-rate adjustment.

Please Note: Due to the Nature of This Report The Toc is Not Available

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