A Rough Economic Year Ahead for Cuba

A Rough Economic Year Ahead for Cuba
Media Center, Image DECEMBER 22, 2015 | 20:23 GMT

According to a U.N. 2015 study led by the Economic Commission for Latin
America and the Caribbean, Cuba's services sector is responsible for the
growth in the Cuban economy, representing roughly 70 percent of gross
domestic product. Tourism in particular has and continues to provide
significant revenue to Havana, contributing $2.5 billion, or roughly 3
percent of GDP.

Furthermore, Cubans and Cuban-Americans have sent approximately $2
billion worth of remittances in the past year. The revenue is expected
to grow within the coming years as well, ever since the U.S. Treasury
Office of Foreign Assets Control raised the limit of remittance exports
from $500 to $2,000 per quarter. U.S. citizens are now authorized to
import $400 worth of Cuban goods, which will boost Cuba's domestic
market sales. As a result, the Cuban economy is forecast to grow on
average more than 4 percent between 2016 and 2020.

Unfortunately for Cuba, the U.S. trade embargo and the restrictions it
places on economic growth remain. For all the benefits tourism and
remittances provide, Cuba's economy still heavily depends on these
revenues, with no alternatives to diversify the economy because of the
embargo. Because of this, Cuba will continue to be dependent on
Venezuelan aid and fuel subsidies, a situation made more precarious by
the results of Venezuela's Dec. 6 legislative elections. The
opposition-led National Assembly can now call a referendum on
Venezuela's international treaties that are deemed to compromise its
national sovereignty, specifically its controversial treaties with Cuba.

The embargo on Cuba will define the state of its economy in 2016, and
unfortunately for Cuba, chances that the United States will lift
restrictions are slim. With congressional and presidential elections
approaching in 2016, domestic politics will limit U.S. politicians' and
lawmakers' ability to cooperate in lifting the embargo. Thus, despite
the thaw in U.S.-Cuba relations in 2015, it is unlikely that the United
States will lift its embargo in 2016. It will be a more difficult year
for Cuba as it becomes more dependent on tourism, remittance revenues
and Venezuelan oil subsidies, all while remaining economically isolated.

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Source: A Rough Economic Year Ahead for Cuba | Stratfor -
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