Country Report Cuba March 2009

Outlook for 2009-10

• Following the March 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 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 2.6% of GDP in 2009-10, as the trade deficit shrinks.

Monthly review

• Raul Castro's major reshuffle had been expected, but not the removal of two of the most senior younger figures: Felipe Perez Roque, the minister of foreign relations; and Carlos Lage Davila, vice-president and de facto prime minister.
• The US Congress has passed legislation to reverse measures introduced in 2004 by Mr Obama's predecessor, George W Bush, to tighten restrictions on sending remittances and travel by Cuban-Americans.
• Visits to Cuba by five presidents from the Latin America and Caribbean region have confirmed the diplomatic pressure being put on the US to announce a further change in Cuba policy.
• The reshuffle has brought some changes in ministerial organisation, but all of the new appointments have been selected from the existing ranks, suggesting that a change of pace is possible but radical change in direction is unlikely.
• The minister of telecommunications has announced that prices for mobile phones will be reduced, but confirmed that access to the internet is still limited by bandwidth constraints.
• Positive results have been reported in agriculture and tourism for the start of the year, and there has been a reduction of dependence on foreign partners in the development of coastal oil fields.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;49
NAICS Code: 11;22