Country Report Cuba February 2009

Outlook for 2009-10

• The Economist Intelligence Unit does not expect major political or economic change at least until after the next Communist Party congress in late 2009.
• Some US economic sanctions (on financing, travel and remittances by Cuban-Americans to Cuba) are likely to be eased by the US president, Barack Obama, but full normalisation of economic and political relations is unlikely.
• 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 to less than 4% of GDP by 2010. It 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% of GDP in 2009-10, as the trade deficit shrinks.

Monthly review

• The domestic political scene has been uneventful in the past month, with a continuing effort by the government to rein in informal economic activity. Fidel Castro has insisted that he is no longer in charge.
• The new US administration has not yet revealed the outcome, or even the scope, of its review of policy on Cuba. In the mean time, the Cuban government has been busily cultivating relations with other countries.
• The UN Human Rights Council (HRC) is due to discuss Cuba's human rights record in the context of a Universal Periodic Review. Despite the HRC's tameness, the event represents a significant new engagement for Cuba.
• The government has published budget estimates and plans, showing the impact of high import prices and hurricanes, and indicating plans for retrenchment in 2009.
• New taxi licences and scope for self-build housing have increased the scope for private initiative.
• The early termination of an oil production sharing contract has worried private foreign investors.

This report covers the following industry codes:
SIC Code: 53
NAICS Code: 44