Cuba Economy

By: EconomyWatch Content   Date: 11 March 2010

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Cuba is an insular nation, with a population of 11 million, making it the most populous nation in the Caribbean. Its immediate neighbors are the USA, Bahamas, Haiti, Jamaica and the Cayman Islands. The main island has a surface area of 105,006 square kms and a population of 11,451,652 (209 est.).

 

Cuba is also the second largest mineral resource of nickel, after Russia. Cuba is also the world’s fifth largest producer of refined cobalt. Oil exploration has been able to locate oil beds, which can produce 4.65 billion to 9.3 billion barrels.

 

Cuba’s economy is largely state controlled and the current government of Cuba is trying hard to maintain a balance between preserving firm political control and reviving the economy. The standard of living of the Cuban people is far below the levels witnessed before the economic downturn of the 1990’s, which was triggered by the withdrawal of soviet subsidies.

 

Cuba Economy: Reforms and the GDP

The country’s government undertook certain economic reforms in 1993 and 1994 to alleviate the country’s economic problems, including the shortage of food and consumer goods. Some of the prominent reforms included the opening up of the country’s tourism segment, allowing foreign investment, authorizing self employment in some areas and legalizing the holding of the US dollars. Raúl Castro's administration has launched an electricity revolution, aimed at removing the country’s electricity problems.

 

Continued growth in the country’s tourism sector from 1999 onwards has enabled Cuba to witness improved levels of GDP growth in recent years. However the country’s real GDP growth rate stood at a low of 1% in 2009, according to estimates, as compared to the 2007 GDP growth of 7.5% and 2008 GDP growth rate of 4.3%. Nearly 75% of the country’s GDP is contributed by the service sector, which largely comprises of doctors and medical professionals. While industry contributes nearly 21% of Cuba’s GDP, agriculture contributes a mere 4%.

 

Cuba Economy: Cuban Economic Profile

Although the Cuban economy is largely state controlled, it has significant foreign investments. The Cuban government owns and runs most of the means of production and offers free health care, free education , universal employment, compensation and retirement benefits, as well as basic necessities like food at low cost. Listed below are certain key features of the Cuban economy:

  • It imports 80% of its food

  • It has a strong biotechnology and pharmaceutical industry

  • The tourism industry is the main growth driver

  • Wage and pension levels are very low in Cuba

  • The Cuban peso’s value is pegged to the US dollar

  • Cuba exports sugar, medical products, nickel, tobacco, shellfish, citrus and coffee

  • It imports petroleum, food, machinery and chemicals

  • It buys oil from Venezuela on preferential terms and sends its doctors as aids in return 

Cuba Economy: Key Statistics

Here are some key statistics as per the 2009 estimates

  • GDP (real growth rate): 1%

  • Unemployment rate: 1.6%

  • Consumer Price inflation : 4.3%

  • Industrial Production growth rate: -2.8%

 

 


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