MOST LIKELY REGIMES AND THEIR PROBABILITIES
18-Month: Raúl Castro 70%
Five-Year: *Reform Communist 40%
FORECASTS OF RISK TO INTERNATIONAL BUSINESS
Turmoil Financial Transfer Direct Investment Export Market
18-Month: Low D- C D+
Five-Year: Moderate C (C+) C+ C (C+)

( ) Indicates change in rating.            *  Indicates forecast of a new regime.

KEY ECONOMIC FORECASTS
Years Real GDP
Growth %
Inflation % Current
Account ($bn)
2008-2012(AVG) 2.7 1.8 -0.71
2013(F) 3.5 6.1 -0.90
2014-2018(F) 4.8 4.7 -1.35

Stability Will Be Top Priority

In late February, the National Assembly elected Raúl Castro to a second five-year term as president.  Far more significant were Castro’s announcements that he would retire from politics at the completion of his term in early 2018, and his call for political reforms, including a two-year term limit on the presidency and an official retirement age for all high-level figures in both the government and the ruling PCC.

In terms of potential successors, the clear front-runner at this point is Miguel Díaz-Canel Bermúdez, who was elected to the post of first vice president, and is the highest ranking current member of the PCC Politburo who is younger than 60 years old.  Díaz-Canel has lent strong support to President Castro’s self-described effort to “save” Cuba’s socialist system by introducing some market reforms.  President Castro has stated that he intends to press forward with reforms, and there is every reason to expect that his hand-picked successor will do likewise.

Although Raúl Castro has publicly attempted to play down the significance of his retirement plans, the leaders of the PCC are troubled by doubts that the system they have created and defended for more than half a century can survive the end of the Castro dynasty.  That much is clear from the obvious importance they attach to maintaining a visible connection to Fidel Castro, despite the revolutionary icon’s clearly diminished capacity.

The PCC leadership will proceed cautiously with the succession plan.  Feedback that points to something less than strong popular support for Díaz-Canel (or some other figure who assumes front-runner status down the road), or developments, whether domestic or external, that give rise to difficulties that might overwhelm an inexperienced leader could prompt an abrupt change in plans.

Economic Forecasts for the Three Alternative Regimes

  Reform Communist Raúl Castro Hard-line Communist
  Growth
(%)
Inflation
(%)
CACC
($bn)
Growth
(%)
Inflation
(%)
CACC
($bn)
Growth
(%)
Inflation
(%)
CACC
($bn)
2013 3.5 6.1 -0.90 0.6 7.1 -1.50 1.5 7.5 -1.30
2014-2018 4.8 4.7 -1.35 1.3 4.3 -0.50 4.0 4.3 -0.95

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