Cuba: Economic and Political Overview
In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response
The Cuban economy is still affected by the embargo imposed by the United States. While Washington was expected to loosen its sanctions under President Joe Biden, his approach towards Cuba has been tougher than former administrations, as he further tightened the trade and travel restrictions that were put in place by Donald Trump. In 2023, the Cuban economy recorded an estimated GDP contraction of between 1-2% according to the Central Bank. According to the Economic Commission for Latin America and the Caribbean (ECLAC), the projected GDP growth for Cuba will be 1.7% in 2024.
Cuba is not transparent with its public accounts. At the beginning of 2021, the Cuban government implemented a currency and exchange rate unification, which should yield positive results in the long term. In the short term, though, the policy aggravated some economic issues in the country, most notably causing a huge increase in inflation (The year-on-year inflation rate in June 2023 was 45% - CEPAL). The Cuban government increased the projected fiscal deficit for 2023 by 44.4% compared to the first projections, now amounting to approximately EUR 3.8 billion. The increase in the deficit impacted the public debt incurred for the year, which amounted to EUR 5.8 billion. Since monetary unification, the debt ratio has surged, triggered by a downward revaluation of GDP. Despite a debt restructuring accord inked in 2015, the country defaulted in 2020. Subsequently, a second agreement was brokered with the Paris Club in 2021, enabling Cuba to settle its 1986 sovereign default by 2015. This initiative cleared USD 8.5 billion of the USD 11.1 billion debt, while the remaining portion was allocated to investment projects and spread out until 2033.
Despite a low unemployment rate (1.3% in 2022 – World Bank), the living standards of the Cuban population remain very low. It should be noted that while official unemployment rates are low, unofficial estimates are about double the official rate. Additionally, Cuba remains heavily dependent on food and energy imports, as it imports 80% of its food consumption. The country's situation is uncertain, as reforms are giving an increasingly significant role to private companies. This has led to pilfering, a robust black market, and brain drain.
Cuba heavily depends on its natural resources to run its economy. Despite its small size, Cuba is rich in natural resources. Nickel is highly important for the country, and cobalt is also abundant on the island, making Cuba one of the highest producers and exporters of both nickel and cobalt in the world. Cuba also has offshore oil and natural gas reserves, mainly in the northern part of the island. Agriculture represents 0.8% of GDP and employs 17% of the population. Its main crops are still sugar and sugarcane, which take up a third of the cultivated land. However, in the last six years alone, sugar production has fallen from more than 1.5 million tonnes a year to less than half a million tonnes. Tobacco is the country’s second largest export crop. Other agricultural products include citrus, coffee, corn, rice, potatoes, beans, bananas, soy, cotton, and livestock. According to the FAO, the estimated cereal production for 2023 stood at 290,000 tonnes, approximately half of the five-year average. This decline is attributed to insufficient agricultural inputs, restricted access to agricultural credit, and limited farmer access to credit. As per the national government, Cuba failed to meet seven key state order productions in 2023: rice for consumption, twisted tobacco for export, beef for the industry, fresh milk, coffee, eggs, and wood.
Industry represents 23.8% of GDP and employs 17% of the population. It focuses on agrifood, production of cement, textiles, tobacco, and agricultural machinery. Cuba also has significant mineral resources (particularly of nickel, cobalt, gold, and copper) and is currently conducting hydrocarbon exploration. The cigar industry is one of the leading industries in the country, and it is highly dependent on tourism, as tourists are the leading customers of the product. Overall, the manufacturing sector is estimated to account for 11% of the country’s value-added.
The main economic activity in Cuba is the services sector, which represents 74.6% of GDP and employs 66% of the active population. Its significance is strongly related to the development of tourism, which leads the service sector alongside retail. For a long time, tourism has been pivotal in preventing the economy from total collapse: although the tourism industry was hit the hardest during the COVID-19 pandemic, tourism rates have been significantly increasing, which positively impacts the economy as a whole. Nevertheless, Cuban officials reported that 2.4 million tourists visited the island in 2023, approximately 1.1 million fewer visitors than the projected 3.5 million. The education sector is highly valued, with a focus on universal access to education and a strong emphasis on academic achievement.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 17.7 | 17.1 | 65.2 |
| Value Added (in % of GDP) | 0.9 | 23.3 | 75.0 |
| Value Added (Annual % Change) | -13.2 | -6.8 | 4.1 |
Source: World Bank - Latest available data.
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| Monetary Indicators | 2015 | 2016 | 2017 | 2018 | 2019 |
|---|---|---|---|---|---|
| Cuban Peso (CUP) - Average Annual Exchange Rate For 1 MUR | 0.03 | 0.03 | 0.03 | 0.03 | 0.03 |
Source: World Bank - Latest available data.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
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According to the World Bank, Cuba is not only a country that is open to foreign trade, but it is also highly dependent on it, as trade represents 89% of the GDP. The country has been a member of WTO since 20 April 1995 and a member of GATT since 1 January 1948. According to the latest available data from OEC, in 2022, Cuba’s main exports were rolled tobacco (USD 275 million), nickel mattes (USD 163 million), zinc ore (USD 127 million), hard liquor (USD 102 million), and raw sugar (USD 67.2 million); whereas imports were led by poultry meat (USD 365 million), concentrated milk (USD 115 million), soybean oil (USD 108 million), corn (USD 105 million), and wheat (USD 102 million).
In 2022, Cuba's main export partners were China (USD 426 million), Spain (USD 139 million), Germany (USD 58.5 million), Portugal (USD 43.3 million), and Switzerland (USD 41.4 million). As per imports, they came chiefly from Spain (USD 812 million), China (USD 404 million), the United States (USD 341 million), Brazil (USD 290 million), and the Netherlands (USD 225 million). The embargo imposed by the United States has long been an obstacle to Cuba's foreign trade. It prohibits most trade and financial transactions between American companies and Cuban entities, aiming to isolate Cuba politically and economically. Located at the crossroads between Latin America and the United States, Cuba is the largest island in the Caribbean and maintains strong economic and financial relations with Venezuela - its energy partner. Relations with China, Cuba's most important trade partner, have been intensifying for the past decade. Furthermore, Beijing purchases much of the Cuban nickel, which has overtaken sugar as the country's leading export commodity.
Cuba's lack of transparency remains an obstacle towards accurately accounting its trade balance. According to the WTO data, Cuba is a net importer of goods and, in 2021, imports of goods were equal to USD 8.4 billion, while exports totaled USD 1.9 billion (latest data available). The imports of services in the same year were valued at USD 1.6 billion, by far inferior to exports, which totaled USD 5.8 billion. According to preliminary figures released from the Central Bank of Cuba, the value of goods and services exports in 2023 was USD 9 billion, a figure approximately 770 million lower than planned. This included around 2.15 billion in goods and 6.91 billion in services, resulting in export levels lower than those achieved in 2022. In the exports chapter, there was a 15% decrease in the price of nickel per ton, with production remaining at 41,000 tons for the year. Meanwhile, the price of sugar increased by 28%, although national production fell 25% below the planned level. Additionally, there was an expenditure higher than planned on goods imports, due to price increases, resulting in an additional outlay of USD 718 million compared to 2019.
| Foreign Trade Indicators | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 9,901 | 7,230 | 8,431 | 9,833 | 8,920 |
| Exports of Goods (million USD) | 2,062 | 1,703 | 1,966 | 2,170 | 1,939 |
| Imports of Services (million USD) | 2,028 | 1,538 | 1,688 | 0 | n/a |
| Exports of Services (million USD) | 10,240 | 6,985 | 5,884 | 0 | n/a |
| Imports of Goods and Services (Annual % Change) | -2.9 | -7.6 | -4.7 | n/a | n/a |
| Exports of Goods and Services (Annual % Change) | -4.6 | -20.5 | -9.1 | n/a | n/a |
| Imports of Goods and Services (in % of GDP) | 10.6 | 7.5 | 45.1 | n/a | n/a |
| Exports of Goods and Services (in % of GDP) | 12.2 | 8.2 | 34.9 | n/a | n/a |
| Foreign Trade (in % of GDP) | 22.8 | 15.7 | 80.0 | n/a | n/a |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
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The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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Latest Update: April 2024
