How the Cuban economy is performing in 2025

The economic situation in 2025 remains discouraging; there have been no concrete positive changes compared to 2024. The same imbalances and distortions of recent years continue to persist.

According to the limited global statistics available, the Cuban economy continues to be in recession, showing no growth for over 12 consecutive quarters. While specific figures for the decline in 2024 have not yet been published, it may be around -3 to -5 percent compared to 2023.

The high fiscal deficit persists, although it has decreased compared to previous years. This is due not only to the increase in tax revenues but also to the rise in unspent expenditures caused by a lack of necessary materials. Furthermore, real household spending has contracted, which has allowed inflation to be kept in check through pent-up demand—reduced purchasing power. However, both factors carry extremely high social costs: fewer people have access to essential subsidies, and low-income families are unable to buy a basic basket of goods and services.

Clearly, the excess issuance of money cannot be recovered through state budget revenues, resulting from the limited supply of goods provided by the private sector. The production of goods is restricted, and this behavior is understandable given the lack of external financial resources needed to acquire intermediate goods for the production process.

The recently concluded sugar harvest is among the lowest in the last 100 years, with several estimates placing production at less than 100,000 tons of sugar, much lower than the planned 265,000. Additionally, the sugar mills started late; a report in the Granma newspaper in early January stated that “only six of the 14 planned mills are operating.”

The result is a continued deterioration in the purchasing power of salaries and pensions as the government’s rentier mentality drives increases in certain prices and rates. A recent example is the controversial increase in telecommunications services, with packages costing more than the average salary in the country.

The so-called basic food basket continues to pose significant challenges for Cuban families. Its cost exceeds 24,000 pesos for two people at market prices, and the portion subsidized by the state suffers from various issues concerning delivery times and quantities that are far below those provided in the past. Essential components of the Cuban diet, such as rice, have extremely low production levels in the country, forcing the state to depend on imports or even donations. However, this means that products can go months without being distributed, leading to increased prices in the free and informal markets.

In the same way, due to low production, exportable products such as nickel, sugar, honey, rum, and sea shrimp continue to underperform in generating revenue. Tourism is on the decline, significantly short of both planned and historical visitor levels, primarily affected by the overall deteriorating state of the economy.

We will examine some more specific topics below with the latest figures:

Inflation

Although a slowdown trend has continued since 2024, there is resistance to its reduction. The inflation rate is around 16.43%. This does not mean that prices are falling; rather, they are still rising, albeit at a slower pace. Thus, in May 2025, the Consumer Price Index stood at 475.88 compared to the 2010 base year, with a year-over-year change of 16.43%, as shown in the following table.

Index, monthly, cumulative, and year-over-year variation by division as of the end of May 2025.

However, according to figures provided by the ONEI, in its latest May report, there is a slight increase in food inflation, particularly in the prices of tomatoes, eggs, rice, potatoes, and live poultry. According to this data, rice had the greatest impact on the monthly rise in the “food and non-alcoholic beverages” division.

Factors most affecting the monthly variation in the food and non-alcoholic beverages sector in May 2025.

The overall indicator continues to grow over time, as shown in the following graph. In other words, the increase in prices, which has not been balanced by a significant rise in salaries, directly affects the purchasing power of Cuban families, thereby indicating a decline in the standard of living compared to the levels achieved in the past.

As previously stated, the social cost of this is reflected in the sharp rise in poverty increasingly visible on Cuban streets. In other words, the impoverishment of certain segments of the population may be functioning as an anti-inflationary measure: prices are not rising as much, not because production has increased, but because fewer people can afford to buy.

Consumer Prices

Tourism

One of the entities once hailed as the new engine of the economy, displacing sugar production—which formerly played that role—is now in a state of emergency. It cannot be said that 2024 was a good year for tourism; however, when comparing the first quarter of 2025 with that of 2024, visitor numbers have dropped by approximately 30%. If we include the fourth quarter, the number of visitors continues to decline: 741,106 visitors have been recorded through April, representing a 72.4% decrease, which is 282,983 fewer visitors than in 2024.

International Tourism Indicators. January-March

According to official data, hotel occupancy fell to 24.1% in the first quarter of 2025—eleven percentage points lower than a year ago—with three out of four rooms remaining empty during the peak season.

The decline is widespread: Canada saw its arrivals fall by 31.8%, the Cuban community abroad by 20.4%, and the Russian Federation by more than half (-50.1%). Modest increases in markets such as Turkey (+32.8%) and China (+18%) do not offset the loss of traditional markets.

This steep decline, which deserves thorough analysis by authorities given its status as the sector receiving the most investment, is influenced by several factors. These range from aggressive U.S. policies imposing visa restrictions on travelers who arrive in Cuba, to various significant internal issues: prolonged power outages, poor road conditions, increased perceptions of insecurity, and the weakening of non-hotel services, among others.

Transportation

Some of the sensitive issues for the population include both food and transportation. In the latter case, various factors contribute, including the low availability of transport options due to deterioration and shortages of basic essentials such as buses, tires, batteries, etc. This has resulted in a decrease in the number of passengers transported, with buses carrying 14 million fewer passengers.

Passengers transported. January-March

In the productive sector, there has been a significant decrease in transportation due to a fuel shortage. This directly affects value chains: crops rot in the fields because trucks do not arrive on time; truckers who manage to operate purchase diesel on the informal market at prices much higher than those in the official market, meaning freight incurs an additional cost that is then passed on to the wholesale and retail prices of products.

Furthermore, the significant decrease in public transportation routes compels workers to spend extra hours and pay additional wages for their commutes, shortening their effective workdays and diminishing companies’ productivity.

Blackouts

It is nothing new that, so far in 2025, with notable exceptions, the electricity generation deficit has consistently remained above 1,000 megawatts. This indicates a critically serious situation that affects society at large, with provinces and municipalities facing over 20 consecutive hours of blackouts each day.

The persistent deficit of nearly a third of peak demand leaves many provinces without power for over 20 hours. As a result, industrial and agricultural activities come to a standstill: production lines cease operations for entire shifts, automated irrigation systems fail, and the cold chain is interrupted, leading to losses in crops and processed foods.

In other areas, both in the public and private sectors, the closure of bars, restaurants, and workshops is being felt. Tourism, which relies on a well-lit city and stable services, loses its appeal when the streets are dark. The result is a contraction of the currency the country needs.

On the work front, the lack of electricity decreases individual productivity: poor sleep on nights when the power is out and dealing with extreme heat both diminish work performance. Furthermore, numerous processes essential to modern employment—heavily reliant on digitalization—are halted without computers and connectivity. Therefore, not only are businesses impacted, but self-employed workers such as programmers, designers, content creators, and others who contribute to stimulating the economy today are also affected.

All of this directly impacts inflation because reduced production also diminishes the supply of goods and services. Additionally, many businesses pass on the costs of generating electricity—using diesel plants—to the final product.

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This article has only analyzed certain areas of the Cuban economy based on data for the year 2025, and only with this information is it possible to demonstrate that the Cuban economy is not recovering from previous periods. However, Cuban authorities, while acknowledging the poor indicators, do not clearly reveal the shortcomings of the centralized planning system currently in place. Furthermore, the so-called macroeconomic stabilization program consists only of general announcements, and its positive results for economic growth are not evident.

Inflation, while increasing more slowly than in previous years, continues to rise monthly, eroding the purchasing power of Cubans and severely affecting retirees and those earning minimum or even average wages in the public sector, which fall short of covering the basic basket of goods and services.

The evidence of Cuba’s economic situation requires the state to finally implement redistributive measures within society. In the short term, a strategy is urgently needed to halt the subsidization of repeatedly unprofitable businesses, increase pensions granted before the monetary reform, and eliminate widespread subsidies for the lowest social groups.

The rise in public prices must be closely monitored; the population is already facing the peak of individual impacts, and any sudden increase can trigger a wave of discontent that destabilizes not just the economic system but also the political system. An example of this was the reaction to the recent ETECSA tariff increase, particularly among young university students.

Continuing to patch things up without changing the model is what has brought us to this point: massive blackouts, nearly nonexistent public transportation, gaps in the delivery of domestic fuels like gas, lack of water, intermittent distribution of basic food baskets, garbage in the streets, and rising violence… these factors alone are enough to give us a sense of the current situation. Persisting in the same actions while expecting different results will only further exacerbate the situation.

The ninth congress of the National Association of Economists and Accountants (ANEC) was recently held. Several colleagues raised concerns with the authorities based on scientific analysis, which are acknowledged but not considered in decision-making.

There are many proposals on the table, but almost all experts agree that it is imperative to implement the comprehensive economic reform that has been postponed time and again, while also giving the market the role it deserves in society. To clear up any misunderstandings, this isn’t about moving to neoliberal capitalism but rather a market-based social model. We’re not inventing anything new; China and Vietnam have already implemented it with positive results, which differ significantly from those presented here. What else needs to occur to take the necessary action?

Omar Everleny Pérez Villanueva holds a PhD in Economics from the University of Havana and is a researcher. He is a visiting professor at Harvard and Columbia Universities, Carleton University, and the Sorbonne. This article was originally published in La Joven Cuba.