The Cuban government announced on Monday a projected economic growth of 1% for the year 2025, as stated by Joaquín Alonso Vázquez, the Minister of Economy and Planning, during a session of the National Assembly. At first glance, this target might seem modest, especially given the severe economic crisis that has impacted all productive sectors and significantly worsened the quality of life for the population.
The minister explained that this growth projection is based on the anticipated recovery of tourism, increased export revenues, and the revival of productive and industrial activities, alongside the stabilization of the National Electric System (SEN), as reported by the state-run Cubadebate. Nevertheless, the current outlook is far from promising, and recent economic indicators cast doubt on the feasibility of this forecast.
In 2024, Cuba's economy faced significant setbacks as crucial sectors like agribusiness and construction failed to meet their targets: steel production was nonexistent, cement production reached only 43.2% of the plan, and wood production was a mere 17.6%. Agricultural production also fell short of demand, with significant deficits in root vegetables, meats, and vegetables. The sugar harvest, historically a vital sector, once again failed, depriving the country of one of its main export sources.
The shortfall in electricity generation capacity and fuel shortages further exacerbated the crisis, affecting not only industrial production but also the daily lives of citizens, who endured prolonged and frequent blackouts. This is compounded by high external debt and the lack of foreign currency, which have restricted imports of food, medicines, and other essential supplies, leaving the country critically understocked.
Challenges Facing Cuba's Economic Recovery
The government also acknowledged that exports fell short of expectations in 2024, with goods achieving only 92.5% of the planned figures, while services reached 101.6%, mainly driven by medical service exports, as tourism continued to decline. Overall, projected revenues for the year were $900 million below expectations, exacerbating macroeconomic imbalances.
Despite these adverse conditions, the regime remains hopeful that the recovery in tourism and increased knowledge-based service exports can turn the situation around. It also pins its hopes on boosting agricultural production and stabilizing the SEN, with a greater emphasis on renewable energy sources.
However, these promises of improvement clash with the reality of an outdated productive system, the absence of significant foreign investment, and the widespread public discontent over inflation and shortages. Although the government claims that inflation will slow to levels between 25% and 30%, it continues to be a devastating factor for the domestic economy.
Is Cuba's Growth Target Realistic?
Prices in both formal and informal markets remain beyond the reach of most Cubans, while real wages diminish against the backdrop of escalating basic costs. Although the minister assured that the government's projections include measures to reduce the deficit, increase external income, and promote foreign direct investment, the lack of material and financial resources remains an insurmountable barrier.
The promise of achieving a 1% GDP growth by 2025 seems, in this context, more of an aspiration than a realistic goal, especially considering that many of the structural problems of the Cuban economy remain unresolved. In a country where agribusiness production is collapsing, electricity generation is inadequate, and export revenues are declining, the foundations for sustaining economic growth, however modest, appear fragile and insubstantial.
Meanwhile, the population continues to face daily life marked by precariousness, food shortages, and uncertainty about the future. In 2023, the Economic Commission for Latin America and the Caribbean (CEPAL) predicted that Cuba's economy would continue to face serious challenges in the coming years. In its report, the organization noted that Cuba's real Gross Domestic Product (GDP) grew by 2% in 2022, slightly improving from the 1.3% recorded in 2021, despite the impacts of hurricanes.
However, for 2023, a more limited growth of 1.8% was projected, while a slight decline to 1.7% was expected in 2024, indicating three consecutive years of nearly stagnant growth. Nevertheless, reality exceeded these forecasts, with growth reaching only 1%.
Frequently Asked Questions About Cuba's Economic Outlook
What are the main factors behind Cuba's economic crisis?
Cuba's economic crisis is influenced by several factors, including a decline in key sectors like agribusiness and construction, electricity generation issues, fuel shortages, high external debt, and limited foreign currency availability.
Why is the projected 1% GDP growth for 2025 considered unrealistic?
The 1% GDP growth projection for 2025 is considered unrealistic due to ongoing structural problems in Cuba's economy, including outdated production systems, lack of significant foreign investment, and widespread inflation and shortages.
How has Cuba's tourism sector impacted the economy?
Cuba's tourism sector has significantly impacted the economy, with its decline contributing to lower export revenues and exacerbating the country's economic challenges.
What measures is the Cuban government proposing to improve the economy?
The Cuban government proposes measures such as boosting tourism recovery, increasing exports of knowledge-based services, enhancing agricultural production, and stabilizing the National Electric System with more renewable energy sources.