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Cuba: Ten continuous years of macroeconomic deterioration
Since the latter half of the last decade, the Cuban economy has faced a consistent decline, further exacerbated by structural distortions and persistent social issues dating back to the 1990s.
Analyzing the evolution of key macroeconomic indicators, it is clear that the current economic crisis was brewing long before the pandemic’s impact. Macroeconomic metrics indicate a continued deterioration since 2016.
Table 1 summarizes the average values for Gross Domestic Product (GDP) growth and for some productive sectors, foreign trade, and the State Budget, exemplifying this contractive and unbalanced macroeconomic scenario. The evolution of the indicators since 2010 reveals three stages, with turning points in 2016 and 2020.
Table 1. Cuban macroeconomic indicators 2010-2023
(average values by period)
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Source: Author with data from the ONEI Statistical Yearbook.
Source: Author with data from the ONEI Statistical Yearbook.* Calculated with data through 2022
The decline in production and the external sector are interconnected
During 2010-2015, the Gross Domestic Product (GDP) grew at an average annual rate of 2.7% within an environment of relative external prosperity. Agriculture, the sugar industry, and manufacturing industries increased their production of goods, albeit at modest rates. Domestic trade surged at an annual rate of 4.2% (see Table 1).
This performance was driven primarily by agreements with Venezuela, including the shipment of oil under favorable financial terms, the hiring of Cuban professional services—especially medical personnel—, pharmaceutical exports, and increased investment.
The easing of sanctions at the end of Obama’s second term and Raúl Castro’s reforms boosted tourism, remittances, and the small-scale private sector.
Exports of goods and services averaged USD 14.033 billion, while imports averaged USD 10.192 billion, resulting in a significant annual trade surplus of USD 3.841 billion.
Renegotiating external debt with Russia, the Paris Club, and other bilateral agreements temporarily improved access to international financing. External slack and the influx of foreign currency supported GDP growth, which peaked at 4.4% in 2015.
Between 2016 and 2019, the economy began to show troubling signs of fragility. GDP slowed to an average of 1.1% annually amid the Venezuelan crisis, falling oil prices, and tightening US sanctions under the first Trump administration.
The end of the international “commodities boom” indirectly affected the Cuban economy, even though services and tourism are more significant than raw materials in its productive and export structure, because of its close relationship with the Venezuelan economy and trade agreements dependent on oil prices.
Exports decreased to an average of USD 10.989 billion. At the same time, imports dropped to USD 9.707 billion, resulting in a trade surplus of just USD 1.282 billion annually, a 66.6% decline compared to the previous period.
The external contraction directly impacted foreign currency earnings for financing investments and the availability of inputs and financial flows for the current operations of productive sectors. Agriculture, the sugar industry, and manufacturing industries exhibited negative average annual growth rates over the period, with sugar being the most affected (-8.1%).
Since then, greater shortages have become evident in consumer markets. Domestic trade fell at a rate of 1.1%. In 2019, GDP had already entered recessionary territory with a 0.2% decrease, and the difficulties in meeting international financial commitments became increasingly apparent.
The onset of the pandemic in an already weakened economy caused a GDP contraction of -10.9% in 2020, without achieving a sustained and sufficient recovery. The economic collapse is evident in an annual contraction with double-digit rates in the main sectors responsible for producing goods. Agriculture decreased annually by -14.3%, and manufacturing industries by -10.6%.
The ongoing decline of the external sector is associated with a decrease in production. The average GDP growth from 2020 to 2022 was -2.6%, while exports and imports decreased by 31% and 18% compared to the previous period, averaging $7,742 million and $7,928.2 million, respectively.
The trade balance reversed, recording an average annual trade deficit of -$386 million, reflecting the worsening financial restrictions under which the Cuban economy has been operating since then. By 2023, GDP remained 10% below its pre-pandemic level.
The external factors explaining the collapse include the “Ordering Task” failure, which sought to unify the exchange rate system. The result was higher inflation, a loss of purchasing power for the peso, and further distortions in relative prices. The financial crisis worsened with external debt defaults, defaults on foreign investors, bank illiquidity, and an informal foreign exchange market expansion.
The contraction in GDP increased structural dependence on imports and foreign currency, generating pressure on the parallel market due to the lack of official liquidity. The absence of structural reforms has prolonged the crisis and undermined economic policies and the authorities’ domestic and international credibility.
No comprehensive transformations were made to the economic model or its institutions during Raúl Castro’s second term (2013-2018) and throughout Díaz-Canel’s presidency. MSMEs, which emerged in 2021, have boosted some consumer markets and generated employment and income for families. Still, their contribution to productivity and GDP is limited by the restricted regulatory framework in which they operate and by financial and exchange rate risks and distortions that discourage further private investment.
Cuba has yet to achieve an alternative form of international integration apart from the Venezuela-based model and the export of medical services. Tourism is not growing, despite multi-million-dollar investments in hotels; its competitiveness is undermined in an economy where everything is scarce and blackouts are becoming commonplace.
Decapitalization is evident across nearly all sectors and infrastructures. Massive emigration irreversibly impacts every area of productive and service activities. The agricultural and energy crises worsen shortages. Sugar production has reached historic lows, while the domestic manufacturing industry is virtually non-existent under the inefficient monopoly of the state-owned company.
Fiscal imbalances and their consequences
The worsening macroeconomic imbalances are evident not only in GDP but also in the external balance. The fiscal data presented in Table 1 clearly illustrate the evolution of the fiscal deficit as a percentage of GDP, which is crucial for understanding the monetary instability accompanying the current crisis.
From 2010 to 2015, public revenues averaged 62.9% of GDP, while public expenditures reached 65.9%, resulting in a fiscal deficit of -3.1% of GDP. Fiscal prudence during these years benefited from an external environment that facilitated foreign currency earnings and financing for both the productive sector and public spending.
In the following period, 2016-2019, the fiscal deficit widened significantly, with revenue averaging 57.0% of GDP and expenditures averaging 64.7%, resulting in an average deficit of -7.7%. The increased fiscal gap reflected the economic deterioration, a decline in exports, and the paralysis of reforms, which diminished the state’s ability to generate revenue to offset its expenses.
The situation became critical between 2020 and 2022, with tax revenues falling to 45.6% of GDP and expenditures remaining high at 59.3%, resulting in an average fiscal deficit of -13.5%. The alarming fiscal imbalance was once again a consequence of the collapse of economic activity, but the pandemic and the failed monetary reform aggravated it. In 2020, the deficit peaked at -17.7%, financed primarily by monetary issuance. This triggered inflation and a parallel depreciation of the peso.
In 2024, the government began to attempt to reduce the deficit in its budget, but without implementing measures that significantly improve the efficiency of public spending or the profitability of the state-owned business sector.
The fiscal measures adopted have been partial and regressive, such as price and tariff increases. The monetization of the persistent and disproportionate gap in state finances has shifted the cost of the adjustment onto the most vulnerable sectors, reducing the purchasing power of the income and savings of most households.
The lack of a stabilization program and structural reforms has obstructed potential renegotiations with international creditors, intensified financial isolation (beyond the effects of sanctions), and impeded the chances of a fruitful recovery.
What do the latest data say?
The government confirmed that 2024 experienced a further decline in GDP, marking two consecutive years of negative growth and contractions in four of the last six years. The limited data available through April 2025 indicate that macroeconomic imbalances and the production crisis persist. In the first months of the year, tourist arrivals have decreased between 25% and 30%.
The blackouts are relentless. The energy environment remains one of the main constraints to recovery. In 2024, electricity generation fell significantly compared to previous years, and during February and March 2025, daily deficits exceeded 1,200 MW, impacting production and services nationwide. The installation of solar farms has progressed very slowly.
The government reported a public deficit of 9 billion pesos at the fiscal level in 2024, representing a 39% reduction compared to the approved budget.
For 2025, a fiscal imbalance very similar in absolute terms to the 2024 result was budgeted. Although the budgetary adjustment has partially contained the imbalance, the amounts remain unsustainable, exceeding 10% of GDP. They are still financed by money printing without productive backing, which maintains pressure on inflation and the informal exchange rate.
Official inflation closed 2024 at 25%, slightly lower than the 31% recorded in 2023. The National Statistics and Information Office (ONEI) CPI indicated an upward trend in the first months of 2025, with monthly rates of 2.1% in January and 2.75% in February, and fell to 1.22% in March, resulting in year-on-year inflation of 20.6%.
Private and informal markets, which a large part of the population relies on to purchase food, medicine, and other goods and services, are underrepresented in the CPI basket. Therefore, real inflation is higher than the official rate.
In comparative annual terms, inflation has decreased but remains high, highlighting the significant imbalances in the economy that are driving up prices in consumer markets. This continues to diminish the purchasing power of salaries and pensions, worsening the poverty situation for many families.
The informal foreign exchange market remains the primary benchmark for the value of the Cuban peso. Since March 2025, the peso’s depreciation has accelerated.
In April 2025, the USD representative rate reached 365 CUP, while the euro stood at 380 CUP (the official rates remain fixed at 24 CUP and 120 CUP). Cryptocurrencies have also appreciated, with the USDT at 400 CUP, reflecting Cubans’ preference for more stable assets amid exchange rate uncertainty and the depreciation of the CUP and the MLC.
The government has announced new measures to reorganize the foreign exchange market, including a floating rate for the retail market and further partial dollarization. Without correcting the underlying imbalances and distortions in the economy, the coexistence of the informal market and official exchange rate mechanisms seem inevitable in the short and medium term.
The expansion of dollarization has intensified due to the increase in foreign currency sales outlets and the proliferation of payment instruments in US currency. While these measures may stabilize specific sectors, they also exacerbate economic segmentation and heighten inequality.
In short, the most recent data reaffirm the ongoing period of economic collapse that began in 2020, which is rooted in a macroeconomic deterioration that has already lasted ten years.
