Written By: Leo Obregon
Since 2020, the Cuban economy has been consistently deteriorating, and it is currently facing its worst crisis since the collapse of the Soviet Union, which provided vital economic aid, trade, and military support throughout the Cold War. GDP has fallen by 10.1% from 2018 to 2023, agricultural production has significantly declined, and the industrial production index, which measures the real output of a country’s industrial sector (1989=100), fell to only 46 in 2022 (Torres, n.d.). The external sector shows similar dips in productivity: exports have halved since 2013, and imports are down 37% (Torres, n.d.). Additionally, macroeconomic imbalances have begun to increase. Inflation has continued to surge (+77% in 2021, +39% in 2022, and +31% in 2023), and the Cuban peso has depreciated by 88% (Pérez, 2025). The estimated public deficit is nearly 20% of GDP in 2025, which reflects the frailty of the economy due to the lack of strong external financing. The macroeconomic decline in Cuba described in these trends has strained the government’s ability to provide basic goods and services and has put Cuban families under pressure.
The origins of the crisis begin with the Soviet-style economic model that the Cuban government has followed since 1959, which has resulted in low productivity and poor global competitiveness (Torres, n.d.). Following the collapse of the Soviet Union, the Cuban government refused to make any significant changes to its economic policy, which held them back from making any tangible progress towards a sustainable economic system. Similar reluctance to change has occurred in other centrally planned socialist economies, including Laos and North Korea, where a lack of decentralization has led to similar limits in productivity. Throughout the late 2010s, reforms were proposed and failed in Cuba. The economy suffered following the Venezuelan economic crisis that began to intensify in the early 2010s; Crude oil shipments fell by over 35,000 bpd from 2013 to 2023 (Torres, n.d.). Furthermore, as of the last five years, Cuba has suffered several shocks that have worsened the situation even more. The COVID-19 pandemic severely impaired international tourism, once a main source of GDP. Additionally, there have been widespread power outages that have been intensified by hurricanes and the Matanzas supertanker fire, a five day fire that occurred in Cuba’s largest port for crude oil and fuel imports (Reuters, 2022). The power outages have left Cubans without electricity or access to communication and news. These incidents not only decreased productivity but also forced the government to reallocate resources towards emergency responses rather than investments.
There are two main factors intensifying the crisis currently: the government’s poor monetary policy and U.S. sanctions. Before 2021, there were two currencies in circulation: the Cuban peso (CUP) and the convertible peso (CUC), where CUP 1 = USD 1 for official transactions in the state enterprise sector and CUC 1 = CUP 24 = USD 1 throughout the rest of the economy (Vidal and Luis, 2024). In 2021 the Cuban Central Bank devalued the Cuban peso to a new rate of CUP 24 = USD 1, and the CUC was eliminated. This major monetary reform was supposed to align Cuban prices with international markets which would in theory incentivize economic restructuring and innovation, reduce dependence on imported goods, and stimulate exports (UCL, 2024). However, despite state sector salaries more than tripling in December 2020 in anticipation of price hikes due to the higher cost of imports, higher costs and increased consumer spending power pushed up prices and triggered a surge in inflation (UCL, 2024). Additionally, in comparison to the rest of the Caribbean, Cuba has recovered much slower from the impacts of COVID-19. The preexisting sanctions and complete halt in tourism intensified the crisis and further exposed the vulnerabilities of Cuba’s current system. Cuba’s current national income remains well below its pre-COVID level. With poor export earnings and import dependency unchecked, there is little sign that any economic restructuring has occurred (UCL, 2024).
U.S. sanctions have been a large part of the modern crisis as well. Cuba has been under a U.S. trade embargo for the last 60 years, but tighter sanctions under Trump and Biden have had a large effect on the economic wellbeing of the country. The Biden administration maintained many of the sanctions on Cuba from Trump’s first term that cut earnings from services and deterred foreign investment. The administration additionally maintained the designation of the country as a State Sponsor of Terrorism (SSOT). This title had a massive effect, as in the months that followed, foreign businesses delayed payments and abruptly cancelled shipments of imports, export contracts, and investment plans (UCL, 2024). Econometric estimates show that exchanges with the United States accounted for about 8.3% of Cuba’s GDP between 2005 and 2020, and that while trade overwhelmingly favored the U.S. economy, when considering revenue from remittances and visitors from the U.S. Cuba achieved a significant surplus in total economic exchange (Alejandro, 2025). These studies demonstrate that Cuba’s GDP growth is the most sensitive to fluctuations in exchanges with the United States. As the Cuban economy lacks a number of diverse trading partners, its private sector is highly susceptible to changes in U.S. sanctions policy.
Continued U.S. sanctions and poor monetary policy decisions are likely to keep Cuba in a state of economic stagnation. Relations with the U.S. have regained their pre-Obama administration detachment, and it seems they will remain so for the foreseeable future, which will continue to put more pressure on the Cuban economy and the households that have lost purchasing power under the current policy. Recently, there have been uprisings by the general population as a direct result of the crisis; in 2024, protests were organized to call for access to food and electricity, and in 2021 protestors directly called out the government for their disapproval of its monetary policy. Both were met with harsh censorship and widespread arrests. Additionally, the official data published by the government does not display the true scale of the crisis. Official figures greatly understate the actual increase in prices faced by Cuban households; for example, research published in 2021 estimated the inflation rate to be between 174% and 700%, which is well above the government’s estimate of 77.3% (UCL, 2025). As of December 2025, with mass dissatisfaction rising and no end in sight for the crisis ahead, it is unclear what the future of Cuba and its economic well-being will look like.
References
UCL. (2024, January 25). Comment: Economic crisis in Cuba: government missteps and tightening US sanctions are to blame. UCL News. https://www.ucl.ac.uk/news/2024/jan/comment-economic-crisis-cuba-government-missteps-and-tightening-us-sanctions-are-blame
Torres, R. (n.d.). https://www.american.edu/centers/latin-american-latino-studies/upload/crisis-in-cuba-what-are-we-talking-about.pdf
The Economic Crisis in Cuba, Its Causes, and Migration. | Cuba Capacity Building Project. (2025, August 8). Columbia.edu. https://horizontecubano.law.columbia.edu/news/economic-crisis-cuba-its-causes-and-migration
Vidal, P., & Luis, L. R. (2023). Cuba’s Monetary Reform and Triple-Digit Inflation. Latin American Research Review, 1–18. https://doi.org/10.1017/lar.2023.59
Alejandro, P. (2025, February 13). What Effects Do U.S. Sanctions Have on the Cuban Economy? | Cuba Capacity Building Project. Columbia.edu. https://horizontecubano.law.columbia.edu/news/what-effects-do-us-sanctions-have-cuban-economy
Reuters. (2022, August 10). Cuba’s worst ever fire brought under control after burning for 5 days at oil depot, officials say. CNN. https://www.cnn.com/2022/08/09/americas/matanzas-cuba-worst-fire-intl-hnk
UCL. (2025, July 27). Comment: Cuban government scrambling to deal with outrage about country’s economic crisis. UCL News. https://www.ucl.ac.uk/news/2025/jul/comment-cuban-government-scrambling-deal-outrage-about-countrys-economic-crisis
Hurd, Richard. (2019, March 15). A friday morning in March in La Habana Centro
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