Cuba Grapples with Deepening Economic Crisis, Faces Critical Choice for 2026

Economic Turmoil Persists into 2026

Cuba continues to navigate its most severe economic crisis in decades, a situation described by some experts as worse than the 'Special Period' of the 1990s. The nation faces a critical juncture in 2026, with its leadership confronted by the choice of implementing substantial reforms or risking a prolonged state of emergency.

Economic forecasts for 2026 remain bleak. The UN Economic Commission for Latin America and the Caribbean (ECLAC) projected a mere 0.1% growth for Cuba in 2026, following a 1.5% decline in 2025, positioning the island alongside Haiti as the only countries in the region in recession. Cuba's Minister of Economy and Planning, Joaquín Alonso, announced a 'modest' 1% macroeconomic growth forecast for 2026, a target that was also set for 2025 but ultimately unmet. The minister also stated that the country continues to operate under a 'war economy' and that existing 'tensions' could worsen.

Inflation, Shortages, and Energy Crisis Deepen Hardship

High inflation remains a corrosive force within the Cuban economy. Official inflation stood at approximately 25% in 2024, a slight decrease from 31% in 2023. However, economist Pedro Monreal reported a 2.06% monthly inflation increase in January 2025, translating to an annualized rate of 27.7%. Food and non-alcoholic beverages alone accounted for over half of the total inflation in both 2023 and 2024. The official Consumer Price Index (CPI) is believed to underestimate the true inflation rate, as it often excludes the informal markets where many Cubans procure essential goods.

Widespread shortages of food, fuel, and basic necessities continue to plague the island. The energy sector is particularly fragile, with frequent and prolonged electricity outages becoming a daily reality. A nationwide blackout occurred in October 2024 due to the failure of the Antonio Guiteras Power Plant, and blackouts persisted through late 2025 due to mechanical issues, severe weather, and a lack of fuel and spare parts. Some regions experienced as little as four hours of electricity per day in 2025.

Government Initiatives and Calls for Reform

In response to the escalating crisis, the Cuban government has introduced various measures. In January 2021, currency and price reforms were implemented, including a devaluation of the Cuban peso, which inadvertently triggered an inflationary spiral. While over 11,000 small and medium-sized enterprises (MSMEs) have been permitted since 2021, new regulations in September 2024 tightened state controls over the private sector. A 2023 'forced expropriation law' also grants the government the authority to seize private property for 'public utility' or 'social interest.'

Prime Minister Manuel Marrero outlined key priorities for 2025, focusing on the recovery of the National Power System, improved foreign currency management, partial dollarization, and increased domestic production. President Díaz-Canel has underscored the urgency of restoring economic growth and generating foreign exchange, emphasizing the 'effective implementation of the Government's economic reform programme.' Economists suggest that a comprehensive transformation program is needed, encompassing macroeconomic stabilization, unification of the currency exchange system, and structural reforms.

External factors, including ongoing U.S. sanctions, the impact of the COVID-19 pandemic on tourism, and reduced oil shipments from Venezuela, have further exacerbated Cuba's economic vulnerabilities. The potential for further disruptions to oil and financial flows from Venezuela, particularly following recent political developments, poses an additional threat to Cuba's energy security.