Country Report Cuba July 2009

Outlook for 2009-10

• The focus for the president, Raul Castro, will be on responding to the economic slowdown and attempting to shape Cuba's shifting relations with the US.
• The initiation of talks between Cuba and the US marks an important step, but many obstacles remain on the path towards normalisation of bilateral relations. We expect progress to be slow.
• Fiscal austerity will delay investments. Economic reforms will be gradual, led by efforts to improve the productivity of domestic agriculture and industry.
• The fiscal deficit will be monetised, while inflation and pressure on the unofficial exchange rate (for personal transactions only) will be held in check by a combination of price controls and wage restraint.
• The current-account deficit is expected to fall from 4.9% of GDP in 2008 to 3.3% in 2009-10, as import compression shrinks the trade deficit. The capital-account surplus will fail to cover it, resulting in a draw-down of reserves.

Monthly review

• The emphasis in political discourse has been on discipline at all levels. This includes efforts to tackle juvenile delinquency and other petty crimes, and the official explanation for leadership changes of the past few months.
• Diplomatic efforts are restoring co-operation between the US and Cuba over issues of mutual interest, but there remain major obstacles in both countries to normalisation of relations.
• As part of its retrenchment effort, the government has announced cuts in local government spending and in some rationed foods.
• The launch of a pilot scheme for restructuring the system of food distribution may have far-reaching implications for the agriculture, distribution and retail? sectors.
• A new labour law allowing Cubans to legally hold more than one job has created the possibility of greater labour mobility.
• The release of 2008 trade data has revealed the importance of a new income stream from the sale of oil products. It has also highlighted the negative impact of lower nickel and oil prices on Cuba's external accounts in 2009.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;60;48;49;2834;80;47;1;15;10;70
NAICS Code: 336;52;517;22;3254;62;48;11;23;212;72