Country Report Cuba April 2009

Outlook for 2009-10

• Following the March cabinet reshuffle the Economist Intelligence Unit does not expect major further political or economic change at least until after the next Communist Party congress in late 2009.
• The US president, Barack Obama, will sign into law a bill that slightly relaxes restrictions on travel and remittances by Cuban-Americans to Cuba, but we assume that further normalisation of bilateral relations will be limited.
• There will be no radical economic liberalisation but the Cuban government will cautiously reform management through decentralisation, price adjustments and greater management accountability and material incentives.
• In an effort to rein in monetary growth the government will seek to reduce the fiscal deficit below 4% of GDP in 2010, after a forecast widening to 7.2% in 2009.
• Policymakers will continue to work towards restoring a single currency, but until this objective is achieved dislocation and perverse incentives will impede economic efficiency.
• We expect only modest improvements in living standards in 2009-10 as GDP growth weakens. The current-account deficit will narrow from 4.9% of GDP in 2008 to an average of 2.6% of GDP in 2009-10, as the trade deficit shrinks.

Monthly review

• The new minister of foreign affairs, Bruno Rodriguez, has swiftly assumed responsibility for the busy schedule of engagements in the ongoing efforts to strengthen international ties.
• A bill to lift the ban on tourist travel to Cuba has been submitted to the US Congress, and although it has wide support, it still faces entrenched resistance from influential figures.
• There is widespread expectation that Mr Obama might announce additional measures at, or even before, a Summit of the Americas to be held on April 17th-19th in Trinidad and Tobago.
• Ariel Terrero, a television announcer who is known as an economic commentator, reported that state spending had been cut by 6% for 2009. The fiscal retrenchment comes in response to a collapse in global nickel prices.
• A major overhaul of the food distribution system has been announced, with responsibility for buying produce and supplying the ration system moving from the ministry of agriculture to the ministry of domestic trade.
• The announcement that state spending plans have been curtailed is a clear sign that the government has trimmed its growth expectations for 2009.

Source: Country Report