Country Report Cuba December 2008

Summary

The Economist Intelligence Unit expects gradual, rather than sudden, political and economic change, although the president, Raul Castro, has signalled that he intends to introduce structural changes in the medium term.
Some moves towards rapprochement between the US and Cuba are possible from 2009 following the inauguration of Barack Obama as the new US president in January 2008, but full normalisation is not in our forecast.
The government will proceed cautiously with reforms to improve economic management through decentralisation and improved material incentives.
A strategy for moving towards a single currency is under way, but until this objective is achieved dislocation and perverse incentives will impede economic efficiency.
We expect GDP growth to stay between 4% and 5% in 2008-09, sufficient to allow modest improvements in living standards. The current-account balance will remain negative, but the deficit will remain small as a percentage of GDP.

Two ministerial changes have been made. One indicates the start of a process of reorganising ministries and the other involves the promotion of a member of the younger generation of technocrats.
The president has reiterated his willingness to talk to the US president-elect, Barack Obama, although he has continued to insist on non-conditionality.
Visits to Cuba by the presidents of China and Russia have highlighted Cuba's efforts to diversify trading partners and cement political ties.
An overhaul of the agricultural sector has been under way, with the redistribution of idle lands and reorganisation of ministries, and further changes are expected.
Despite the need for retrenchment in the wake of three hurricanes, investment programmes have been outlined for the ongoing upgrading of the electricity system and expansion of capacity for pharmaceuticals production.
With little new economic data, a renewed trimming of tourism estimates and a continued fall in world nickel prices have provided a mainly negative picture.
Debt figures published by the Paris Club differ widely from Cuban official data.