Cabo Verde: Contexto econômico

Economic Indicators

Cabo Verde is considered by many institutions one of the most stable countries in Africa and benefits from good democratic governance, transparency, and high literacy rates and health metrics. However, the country has experienced relatively modest growth over the past few years, particularly due to a decrease in tourism (25% of GDP) affected by the global economic crisis and the outbreak of the Covid-19 pandemic. In 2023, the economy experienced a slowdown in growth, coupled with a decrease in inflation and an expansion of the current account deficit. Economic growth decelerated to 4.8%, primarily due to a stabilization in service exports following the post-COVID rebound in tourism (World Bank). Sectors such as accommodation, transport, and commerce drove growth on the supply side, while exports and private consumption fueled growth on the demand side. In 2024, it is anticipated that real GDP growth will hold steady at 4.7%. However, there are notable downside risks to this outlook, including the possibility of commodity price spikes, a potential decline in external demand within the tourism sector, and limited advancements in State-Owned Enterprise (SOE) reform, which could impede fiscal consolidation and growth. Climate-related shocks also present a significant threat, given the country's vulnerability to such events.

The fiscal deficit contracted to 0.5% of GDP in 2023 from 4.3% in 2022, supported by increased revenues. Revenue rose by approximately 20%, fueled by corporate income tax, VAT collection, and revenues linked to airport concessions. Despite a slight increase in total expenditure, public debt declined from 127.1% to 115.3% of GDP. Inflation declined to 3.7%, attributed to the moderation of international food prices and a decrease in oil prices, while it is projected to decrease to 2.7% in 2024 (World Bank). The current account deficit widened from 3.4% to 5.3% of GDP, driven by reduced exports and remittances, particularly in the tourism sector. The State intends to reduce its energy dependency by developing renewable energies and has pledged to obtain 100% of its electricity from renewable sources by 2025. The country has also vowed to lead African states towards similar efforts. Cabo Verde's economy is very much service-oriented with commerce, transport, tourism, and public services accounting for about three-fourths of GDP. At the end of 2023, the Executive Board of the IMF concluded the Third Review of Cabo Verde’s performance under the 36-month Extended Credit Facility (ECF) arrangement, which was endorsed on June 15, 2022, and endorsed the application for an 18-month arrangement under the Resilience and Sustainability Facility (RSF). The conclusion of the review permits the authorities to access the equivalent of SDR 4.5 million (approximately USD 6 million). The RSF arrangement is for 100 percent of quota (SDR 23.69 million, roughly USD 31.45 million). In finalizing the third review, the Executive Board authorized the authorities’ request for adjustments to the end-December 2023 and end-June 2024 performance criteria.

Cabo Verde has recently been upgraded to a middle-income country status. However, despite its optimistic economic results, poverty, unemployment, and lack of diversification affect a large part of the population, and infrastructure remains poorly developed. The country also struggles with drug traffickers, and income inequality and social exclusion remain critical. The unemployment rate stood at 12.1% in 2023, according to World Bank data. Joblessness is highest among young people, with a rate estimated at around 40% (AfDB). To increase productivity and address high youth and female unemployment, the government is supporting micro, small, and medium enterprises through business incubator grants and employability pilot projects. Additionally, the construction of new hotels is providing a channel for construction and creating jobs. The country’s GDP per capita (PPP) was estimated at USD 8,716 in 2022 by the World Bank.

Monetary Indicators	2016	2017	2018	2019	2020
Cape Verde Escudo (CVE) - Average Annual Exchange Rate For 1 ZAR	6.78	7.35	7.05	6.84	5.88

Source: World Bank - Latest available data.

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Latest Update: May 2024