Cuba’s economy is on the verge of collapsing. True, the standard of living has deteriorated under communism—most notably after the fall of the Soviet Union and the end of the subsidies it provided to the regime, which meant that Cuba’s GDP shrank by half during the 1990s. But this time, the crisis may be worse.
It is hard to collect trustworthy data on the country, as Communist authorities routinely hide or manipulate statistics to conceal the true extent of the country’s crisis from the rest of the world. The regime says the economy declined by 5 percent last year, with an accumulated loss of 15 percent of GDP over the past five years. According to credible experts and observers, however, Cuba is likely facing the worst crisis since at least the start of the Cuban Revolution. Official inflation stood at 14 percent in 2025, but according to private estimates, it may have been as high as 70 percent.
Power shortages are one of the most visible symptoms of Cuba’s latest economic crisis. The October 2024 blackout, which left the entire country without power for days, was only the beginning of a series of ongoing shortages that continue to this day, with experts pointing to chronic “neglect” and outdated infrastructure as causes. By its own admission, the Cuban regime can only produce about one-third of its total oil needs, and the blackouts started just as Venezuela—which until 2023 provided Cuba with another third—was cutting its oil shipments by over 40 percent.
In the wake of the capture of Venezuelan dictator Nicolás Maduro, things got worse. Under significant US pressure, Maduro’s successor, Delcy Rodríguez, stopped sending oil to the island altogether. Oil imports from Mexico, which had increased in 2025 as Venezuelan imports declined, were also halted after President Trump issued an executive order imposing tariffs on countries that supply Cuba with oil. For almost a year and a half now, Cubans have gotten used to having power only a few hours per day.
The energy crisis is causing great damage to an already struggling economy. Airlines have restricted or suspended service to the island because airplanes can no longer refuel on the island. As the Cuban government has moved to shut down hotels with low occupancy, tourists have been relocated, and many are fleeing—even Russia, a long-time ally of the Cuban regime, is evacuating their own. Thus, tourism, which accounts for about 13 percent of Cuba’s economy, is coming to a halt, something that cannot yet be reflected in GDP estimates.
Daily life for Cubans is just as nightmarish. Recent videos filmed by locals depict an almost empty Havana, as the country’s capital can no longer afford to keep public transportation running. The federal government has mandated remote work, and universities are also operating virtually, though a lack of energy effectively means they have shut down. Food shortages, which have long been a part of Cuba’s reality, have become more acute.
The decline of Cuba’s economy is producing mass emigration, even more than in the past. A recent study suggests that up to 1.7 million Cubans fled the country between 2020 and 2024. That study placed the 2024 population of Cuba at 8 million people. For comparison, the 2021 US Census estimated the number of foreign-born Cubans living in the US to be 1.3 million.
Even though recent US action may be putting more pressure on Cuba, the dismal performance of the Cuban economy is a function of the Cuban Communist Party’s central planning, which has been uncontested since the establishment of the dictatorship in 1959. Supporters of the Cuban regime point to the 1960 US embargo as the source of Cuba’s economic problems. However, research suggests that between 1959 and 1989, the embargo was only responsible for “a trivial part (less than a tenth)” of the income loss that can be attributed to the Cuban Revolution. There is no reason to believe that the sanctions, and not communism itself, have played a larger role in the years since.
In fact, the same estimate of the effect of the Cuban Revolution on Cuba’s economy shows that the country underperformed by almost 50 percent between 1959 and 1989, even as Soviet subsidies propped up the economy during the 1980s. Put differently, had the Castro brothers not risen to power, Cuba would have been expected to have an economy double its actual size by 1989, before it started to sharply decline after the dissolution of the Soviet Union. The figure below depicts the divergence between Cuba’s expected and actual GDP for the period under study.
Communist policies have destroyed the Cuban economy. Cuba’s GDP per capita, which is estimated to have been about 80 percent higher than that of its Latin American peers in 1955, is now below the regional average. Sugar production, which used to be one of the main drivers of the economy, collapsed from over 8 million tons in 1989 to an estimated 200,000 in 2025.
The steady deterioration of the Cuban economy has led to a steep decline in Cubans’ quality of life. In 1958, for example, Cubans consumed almost 2,700 calories per day on average, one of the highest in the Americas. But as of 2023, 40 percent of Cubans were estimated to be eating fewer than 2,100 calories.
The environment has also suffered. The country has experienced serious pollution since the start of the Cuban Revolution due to the importation of Soviet machinery and production models into its centrally planned economy. Today, as the energy crisis gets worse, Cuba is facing rapid deforestation, with Cubans reportedly resorting to firewood and charcoal to cook. As Cuban economist Carlos Luis Martínez recently explained on Cato’s Spanish-speaking podcast, Cuba may be the best example of what happens when a country intentionally applies “degrowth” policies.
Though uncertainty still looms, the unprecedented depth of the economic crisis may force the Cuban regime to change course soon or even collapse. Raúl Castro, the country’s de facto leader, is approaching his 95th birthday, and the US government is reportedly holding talks with his grandson Raúl Guillermo Rodríguez Castro on the future of the island. Cuba could run out of fuel reserves by the end of March. It seems unlikely that the regime can just hold on.
