Country profile — Cuba

Aug.
27, 2007                                                                          Read Spanish Version

From the Economist Intelligence Unit
Source: Country
Forecast

Editor’s
Note: The Economist, a respected British magazine, offers its latest
country profile on Cuba. Coming from a conservative, disinterested
party, Progreso Weekly thought it would make interesting reading for
our many subscribers. We would also ask you to compare this forecast
and then compare what is being said in the Miami media to what we’ve
been saying now for more than a year.

It
now seems unlikely that the president, Fidel Castro, will return to
office. Since he handed over "temporarily" to his brother
and vice-president, Raul, in July 2006, the process of succession has
taken place. Raul Castro has settled into his role as acting
president, reducing political risk in the event of Fidel Castro’s
death. The Economist
Intelligence Unit
expects evolutionary, rather than sudden, political and economic
change within the existing political system. Hostile relations with
the US will persist, but there is a growing possibility of
improvement after 2008. The Banco Central de Cuba (BCC, the Central
Bank) will maintain discipline in macroeconomic management but
liberalising reforms will be slow. GDP growth will decelerate to 7%
in 2007 and 5.7% in 2008. Investment will drive growth, supported by
rising household spending. Construction, infrastructure and
manufacturing will expand, and there will be some recovery in
agriculture. The current account will show a small deficit, which
will be matched by net direct investment and debt financing flows.

Key
changes from last update

Political
outlook

Raul
Castro’s speech on the July 26th confirmed the change in style of
leadership. It was relatively short, and reiterated the priority
being given to improvements in productivity. It also repeated the
"olive branch" offered to the US, but we do not expect
US-Cuban relations to improve until after 2008.

Economic
policy outlook

Public
statements by the acting president and other officials confirm a
policy of gradual adjustment. In the coming year a greater
availability of consumer goods will be coupled with a series of
reforms of official prices, while a series of commissions examine
more far-reaching proposals.

Economic
forecast

The
cost of imports has been higher than expected in 2007, and may have
contributed to recent trimming of state investment plans. Our GDP
growth forecast has been cut slightly, from 7.1% to 7%, in the light
of this adjustment.