Praia, June 10, 2024 - Cabo Verde has shown resilience in the post-COVID-19 pandemic recovery, but the crisis highlighted vulnerabilities such as dependence on tourism and risks from underperforming State-Owned Enterprises (SOEs). Climate change is exacerbating these weaknesses.
In its report, Cabo Verde Economic Update 2024, the World Bank analyzes the state of the Cape Verdean economy in 2023, projects scenarios for 2024, and presents policy options to accelerate fiscal consolidation, reduce debt vulnerabilities, and foster the sustainable growth of the blue economy, thus strengthening resilience to climate and economic shocks.
In 2023, economic growth decelerated to 5.1%, with tourism returning to pre-pandemic levels. Inflation fell to 3.7% due to lower fuel and food prices. Tourism continues to be the main driver of growth in Cabo Verde, but poverty remains above pre-pandemic levels. The fiscal position has improved, with the deficit decreasing to -0.3% of GDP, driven by an increase in tax revenues. However, fiscal risks related to the performance of SOE are persistent concerns.
Real GDP growth is expected to remain stable in 2024 at 4.7%. However, significant risks persist, including possible increases in commodity prices, weaker external demand in tourism markets, and limited progress on the SOE reform agenda. Climate change also remains a threat due to the country's high vulnerability.
As a Small Island Developing State, Cabo Verde faces unique challenges but also significant opportunities due to its extensive Exclusive Economic Zone. For example, the country is prioritizing the development of its blue economy to promote economic growth and improve livelihoods while preserving marine ecosystems.
In the context of the blue economy, the economic update for Cabo Verde considers artisanal fishing to be vital for food security, despite the challenges of overfishing and inadequate infrastructure. Improvements in fisheries governance and infrastructure could boost this sector. Aquaculture also has significant potential, but needs investment, training, and technical support.
According to Rosa Brito, World Bank Economist and lead author of the report: ¡°The sustainable development of the blue economy is crucial to diversifying Cabo Verde's economy and increasing its resilience. This requires responsible management of marine resources, improvements in data collection and statistical capacity, and the implementation of integrated policies that promote sectors such as maritime transportation and renewable energies. Cabo Verde is committed to transforming these opportunities into sustainable economic growth, benefiting its communities and protecting the environment."
