Cuba Economic Data

Economic data
May 6th 2008
From the Economist Intelligence Unit
Source: Country Data

• The Economist Intelligence Unit’s central forecast assumes that there will be no sudden rupture in the political system. The new president, Raul Castro, is under no immediate threat from the outlawed domestic opposition or from the US; there are no signs of ruptures within the government; and the population’s frustrations are focused mainly on economic hardships, which are slowly being relieved. Nevertheless, the departure of Fidel Castro has opened the way for a gradual shift in the political structure. Under Raul, authority will be less centralised, but we assume that the one-party system will remain.
• Relations with the current US administration will remain hostile, and US sanctions will remain intact. However, a gradual re-engagement is possible under the next US administration, which will take office in January 2009. This would require strong political will on both sides to overcome resistance based on ideology and vested interests, but if it occurred would herald new possibilities for both political and economic liberalisation. Even without full normalisation of relations, a relaxation of sanctions could result in an increase in bilateral economic relations by 2012.
• Economic policy is under review, and a reform process has begun that is likely to bring major changes in the coming year. Our forecast assumes that the state will continue to exercise substantial direct control, but reforms will expand the role of the market. The Banco Central de Cuba (BCC, the Central Bank) will play a pivotal role in a realignment of prices, wages and exchange rates, using a broad range of direct and indirect instruments. We forecast an increase in real wages in 2008 and a revaluation of the unofficial value of the Cuban peso in 2009. Both adjustments will serve to increase real consumer spending. The fiscal deficit (which is monetised) will widen in 2008 before moderating to 4% of GDP by 2012.
• We expect annual GDP growth (using the standard definition, not the Cuban accounting method) to decelerate after a surge since 2004 driven by new export markets and sources of external finance. With a stable population, an average GDP growth rate of around 5% in the forecast period will bring significant improvements in living standards. Higher consumer spending and state investment will provide momentum in the medium term. Close ties with China and Venezuela leave Cuba vulnerable to any reversal of fortune in those countries.

Key indicators	2007	2008	2009	2010	2011	2012
Real GDP growth (%)	6.5	6.4	5.1	4.7	4.8	4.8
Consumer price inflation (av; %)	3.1	2.6	3.6	3.0	3.1	4.0
Budget balance (% of GDP)	-3.8	-4.7	-4.3	-4.2	-4.1	-4.0
Current-account balance (% of GDP)	0.4	-1.0	-0.3	-0.4	-0.3	-0.7
Exchange rate Official CUP :US$ (av)	0.93	0.93	0.93	0.93	0.93	0.93
Exchange rate Official CUP :€(av)	1.27	1.43	1.37	1.30	1.24	1.21

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