Cuba Country Risk Report Q2 2020


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Cuba Country Risk Report Q2 2020

A robust US sanctions regime and the economic collapse of its ally Venezuela will push Cuba's economy into recession in 2019, despite a recently announced economic reform package.

Falling support from Venezuela will force Cuba to rely on more expensive fuel imports from other sources. The loss of other forms of aid from Venezuela will impact Cuba's fiscal revenues in the years ahead.

US-Cuba relations will remain strained following President Donald Trump's decision to place restrictions on travel to the island, as well as the implementation of Title III of the Helms-Burton Act. We see scope for further deterioration given hostile comments from members of President Trump's foreign policy team.

The US embargo will remain in place in the coming years, due to the Republican Party's resistance towards lifting it, capping potential investment into the island.

That said, the Cuban economy holds immense potential given the island's size and proximity to the US market. However, investment and growth will depend on political dynamics in both Cuba and the US.

The constitutional re-write that was approved in February 2019 is likely to bring only modest reforms, with the Partido Comunista de Cuba's dominance of the island's economic and political life unlikely to change.

Key Risks



The Cuban economy is highly dependent on US tourism to fuel growth. A more rapid decline in US tourism than we anticipate amid hostile relations or more sluggish US growth than we current expect could dampen headline economic activity.

Raúl Castro stepped down as president in April 2018. While Miguel Díaz-Canel, the new president, has pushed forward with Castro's planned reform drive, he may lack the cachet to force through reforms at a pace fast enough to address the economy's needs.

Over the long term, demographic decline poses a major risk to Cuba's economic upside.


Executive Summary
Core Views
Key Risks
Country Risk Summary
Economic Risk Index
Political Risk Index
SWOT
Economic – SWOT Analysis
Political – SWOT Analysis
Economic Outlook
Economic Growth Outlook
US Sanctions Taking A Toll On Cuban Economy
GDP By Expenditure Outlook
TABLE: GDP GROWTH FORECASTS
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Outlook On External Position
TABLE: GOODS IMPORTS FAR OUTWEIGHING EXPORTS
Monetary Policy Framework
TABLE: MONETARY POLICY FORECASTS
Fiscal Policy And Public Debt Outlook
Disappointing Revenues Likely To Push Cuban Budget Deficit Wider In 2020
Structural Fiscal Position
TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES
Currency Forecast
Cuba Increasingly Likely To Modify Currency Regime
10-Year Forecast
The Cuban Economy To 2029
Reforms To Underpin Steady Economic Growth
TABLE: LONG-TERM MACROECONOMIC FORECASTS
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings’ Credit Ratings. Any comments or data included in the report are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.Cuba Country Risk Q2 2020ContentsPolitical Outlook
Domestic Politics
Cuba Continues To Re-Shape Political Structures Amid Headwinds
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Mounting Uncertainty Will Not Undermine Political Stability
Global Macro Outlook
Economic Stabilisation Continues And Inflation Picking Up Slowly
TABLE: GLOBAL MACROECONOMIC FORECASTS (2019-2024)
TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS – REAL GDP GROWTH, % Y-O-Y
Index Tables
TABLE: CUBA – MACROECONOMIC DATA AND FORECASTS

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