Economic and Political Overview

flag Cuba 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

 

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

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 2021, the Cuban economy experienced a slow recovery from the economic crisis caused by the COVID-19 pandemic, which led GDP to grow by an estimated 2.2% (Coface). The economy is expected to continue recovering in 2022, when GDP should grow 4.2%, boosted by the post-pandemic global economic recovery.

Cuba is not transparent with its public accounts. In 2021, public debt was an estimated 151.1% of Cuban GDP and it is expected to slightly decrease to 118.9% in 2022. 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, which reached an estimated 500% in 2021. However, the initial effects of currency unification have been fading, and the country's inflation rate is expected to decrease to 30% in 2022. The COVID-19 pandemic deeply affected the tourism sector and revenues collapsed. Although the sector showed some signs of recovery in 2021, tourism revenues still haven't gone back to what they were before the pandemic. Public spending, which is not very flexible given the large share of operating costs, is expected to increase with the rise in civil servants' salaries and a pension system. The CIA estimated that health, education and social assistance represent around 50% of the budget expenses. Despite the lack of reliable data, the government's willingness to continue to invest heavily in the economy suggests that the fiscal deficit should increase. The country's debt should therefore continue to grow. In 2021, the government continued implementing measures in response to the economic crisis resulting from the COVID-19 pandemic, which include financial aid for workers being treated for COVID-19, flexibility to debt payment and stimulus to electronic transactions, and deferrals of social security contribution payments. Overall, Cuba’s response to the pandemic has been one of the most effective in the Caribbean. However, the crisis hindered Cuba’s progress in eradicating poverty and food insecurity in the country.

Despite a low unemployment rate (2.2% in 2018, ILOSTAT. Latest available data), the living standards of the Cuban population today remain very low. It should be noted that while official unemployment rates are low, unofficial estimates are about double the official rate. Furthermore, the unemployment rate is expected to have increased in 2021, especially among the self-employed and those working in the tourism sector, due to the lasting effects of the COVID-19 pandemic. 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.

Main Sectors of Industry

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, as its leading natural resource. 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. Sugarcane has been Cuba’s main crop for over 300 years. Furthermore, agriculture represents 2.7% of GDP and employs 17.4% of the population. Its main crops are still sugar and sugarcane (12.5 billion tons of sugarcane are produced every year), which take up a third of the cultivated land. Tobacco is the country’s second largest export crop. Other agricultural products include citrus, coffee, corn, rice, potatoes, beans, bananas, soy, cotton, and livestock. However, Cuba imports around two-thirds of the food it consumes and in 2021, as imports decreased, the government encouraged citizens to produce more of their own food. As a result, the crisis pushed the government to introduce a new set agricultural policies that eliminate the monopoly of the state-owned company Acopio on purchasing agricultural products.

Industry represents 23% of GDP and employs 17.1% of the population. It focuses on agricultural products, 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 costumers of the product. Therefore, the industry was fairly impacted by the halt in tourism experienced in 2021 as a result of the pandemic.

The main sector of activity in Cuba is the services sector, which represents 73.5% of GDP and employs 65.4% 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 pivoting the economy from total collapse and the sector boomed after Barack Obama mended US ties with Cuba in 2016. However, the tourism industry was hit the hardest during the COVID-19 pandemic and, although travel restrictions are no longer in place, tourism rates are still nowhere near their pre-pandemic levels, which negatively impacts the economy as a whole.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 17.4 17.1 65.5
Value Added (in % of GDP) 3.8 25.1 70.0
Value Added (Annual % Change) 2.6 2.5 2.2

Source: World Bank - Latest available data.

 

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Monetary Indicators 20152016201720182019
Cuban Peso (CUP) - Average Annual Exchange Rate For 1 MUR 0.030.030.030.030.03

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

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.

Score:
28,1/100
World Rank:
176
Regional Rank:
31

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

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.

Score:
4.03/10
World Rank:
77/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

According to the Cuban Chamber of Commerce and the World Bank, Cuba is not only a country that is open to foreign trade, but it is also highly dependant on it - which represents 27.1% of the GDP. According to the latest available data from Comtrade, in 2006 the island mainly exported medicaments (7.3%), cigars (7.3%), powered aircraft (3%), crustaceans (1.9%), and medical apparatus (1.4%), while Cuba mainly imported electric generating sets and rotary converters (4.8%), refrigerators (2.9%), electric filament or discharge lamps (1.8%), rice (1.7%), and medical apparatus (1.7%). However, the latest data available from the Observatory of Economic Complexity estimates that in 2020 Cuba mainly imported poultry meat (5.4%), wheat (3.4%), soyabean meal (3.1%), corn (2.7%), and concentrated milk (2.5%), while the country exported rolled tobacco (23.8%), raw sugar (17.5%), nickel mattes (11.1%), hard liquor (8%), and zinc ore (6.5%).

Cuba's main trade partners are China, Spain, Italy, Germany, and the Netherlands. The embargo imposed by the United States has long been an obstacle to Cuba's foreign trade. And even though the Obama administration lifted the Cold War embargo policy off of Cuba in 2016, former-president Trump suspended the policy for unconditional sanctions relief, saying that he would work on a "better deal" between the two countries. However, U.S.-Cuba relations are expected to improve under the current administration, as president Biden has attested he intends to reverse the Trump's Cuban policies. 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. With the current economic crisis in Venezuela, oil shipments have fallen sharply and are now down by around 40% compared to 2014 levels. 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 Heritage Foundation, Cuba's trade balance ascends to 26.2% of GDP and the average tariff in the country is 7.2%. According to the WTO data, Cuba is a net importer of goods and, in 2020, imports of goods were equal to USD 8.1 billion, while exports totalled USD 2.2 billion; thus leading to a negative trade balance of USD 5.9 billion. Moreover, the imports of services in 2019 (latest available data) were USD 2 billion, by far inferior to the exports, which totalled USD 10.2 billion - resulting on a services trade balance of USD 8.2 billion.

 
Foreign Trade Indicators 20172018201920202021
Imports of Goods (million USD) 10,12011,4849,9018,1658,486
Exports of Goods (million USD) 2,9802,3732,0622,2001,498
Imports of Services (million USD) 2,1182,1952,02800
Exports of Services (million USD) 11,37911,76410,24000
Imports of Goods and Services (Annual % Change) -1.6-2.0n/an/an/a
Exports of Goods and Services (Annual % Change) 0.0-2.4n/an/an/a
Imports of Goods and Services (in % of GDP) 11.712.6n/an/an/a
Exports of Goods and Services (in % of GDP) 14.514.5n/an/an/a
Foreign Trade (in % of GDP) 26.227.1n/an/an/a

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 
 
 
 
 

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Political Outline

Current Political Leaders
President: Miguel Diaz-Canel (since April 19th, 2018)
Vice President: Salvador Valdes Mesa (since April 19th, 2018)
Prime minister: Manuel Marrero Cruz (since December 21st, 2019)
Next Election Dates
Legislative: 2023
Main Political Parties
The Cuban Constitution only recognises one legal party: the Cuban Communist Party (PCC) whose first secretary is has been Miguel Díaz-Canel since April 2021.
However, there are other - unrecognised - parties in the country. Most of these parties receive funds and support from organisations based in Miami, and are connected to anti-Communist organisations and agencies of the U.S. government, even though it is illegal for a political organisation to receive funds from a foreign government under Cuban law.
Type of State
Marxist–Leninist socialist republic.
Executive Power
The President is the head of state and is indirectly elected by the National Assembly for a term of five years, which can be renewed once. The Prime Minister is the head of government and chairman of the Council of Ministers. The President has executive powers, is the commander-in-chief of the armed forces, and controls most aspects of Cuban life through the Cuban Communist Party (PCC). The First Secretary of the Central Committee of the Communist Party is the de facto leader of Cuba, as that is the highest office in the country, followed by the President, and the Prime Minister.
Legislative Power
Legislative power is unicameral and is vested in the National Assembly of People's Power (Asamblea Nacional del Poder Popular). Its 605 members are directly elected by absolute majority vote and serve a term of 5 years. Candidates are elected without formal party involvement, though elected assemblies predominantly consist of members of the dominant party alongside non-affiliated candidates. Assembly members are charged with selecting the Council of State, which consists of one president, one first vice president, five vice presidents, one secretary and 23 other members. The National Assembly is also responsible for deciding on the constitutionality of laws, and making changes to the Constitution if necessary. In July 2019, the National Assembly passed a new legislation which reduces the number of members from 605 to 474; it will be effective with the 2023 general election.
 

Indicator of Freedom of the Press

Definition:

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.).

World Rank:
171/180
 

Indicator of Political Freedom

Definition:

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.

Ranking:
Not Free
Political Freedom:
7/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID19 disease in Cuba, please visit the Cuban Presidency platform with the official data. Official information on the progress of the epidemic in Cuba is consolidated by the Ministry of Public Health (MINSAP). The website provides a daily epidemiological update, which includes key national figures.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Cuba and the current sanitary measures in vigour, please consult the Cuban government platform COVID-19 including the up-to-date information on the containment measures put in place and public health recommendations.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Cuban Ministry of Foreign Trade and Investment (MINCEX).
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Cuba on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the information on the economic recovery scheme put in place by the Cuban government to address the impact of the COVID19 pandemic on the Cuban economy, please visit the website of the Cuban Ministry of Domestic Trade (MINCIN). The information on the Cuban economic emergency plan is available here.

For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Cuban government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Cuba in the IMF’s Policy Tracker platform.
Support plan for businesses
For the information on the local business support scheme established by the Cuban government to deal with the economic impacts of the COVID19 epidemic on their activity, please consult the portal of the Cuban Ministry Domestic Trade, Comercio frente a la Covid-19.

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters
To find out about the support plan for exporters put in place by the Cuban government, please consult the government plan for exports on the Cuban Presidency website.
 

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Latest Update: November 2022