Forecast: Cuba
The president, Fidel Castro, is unlikely to return to office. Following the handover of power “temporarily” to his brother, Raul Castro, in July 2006, the succession has in effect already taken place. This reduces political risk in the event of Fidel Castro’s death. Raul’s leadership style is less centralised, and he is likely to introduce some liberalising economic measures in the coming year. Despite these changes, no improvement in Cuban-US relations is expected until 2009, when a new US president will take office. The Economist Intelligence Unit expects that US sanctions will be eased before the end of 2009, but our forecast does not anticipate normalisation of relations. Cuban economic reforms will be gradual, with an expansion in the role of markets and price, wage and exchange rate reforms. The GDP growth surge of 2005-06 will give way to lower, but still firm, expansion. Foreign investment and financing flows will be sufficient to cover a current-account deficit of 1-2% of GDP.
Key changes from last update
Political outlook
Within Cuba, a broad public debate has raised expectations that policy adjustments will increase living standards in the coming year. If the government fails to deliver, the level of frustration will grow. However, there is still no sign of revolt.
The US president, George W Bush, has confirmed that there will be no easing of hostility towards the Cuban government, despite the change in leadership and signs of economic liberalisation ahead.
Economic policy outlook
Following a public debate on economic policy that proved to be broad and challenging, we expect important economic policy initiatives in the coming months.
Economic forecast
In the absence of new data, our economic forecast is unchanged
Sphere: Related ContentTags: Cuban-US relations, Economy, Fidel Castro, Raul Castro
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