June 10, 2024
Cabo Verde has demonstrated resilience in the post-COVID-19 pandemic recovery, but the crisis has exposed weaknesses primarily reliance on tourism for economic development and risks from underperforming State-Owned Enterprises (SOEs). Unfortunately, climate change continues to exacerbate these shortcomings.
In its report, Cabo Verde Economic Update 2024, the World Bank examines 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 long-term growth of the blue economy, thereby strengthening resilience to climate and economic shock.
In 2023, economic growth decelerated to 5.1%, and tourism returned to pre-pandemic levels. Inflation dipped to 3.7% as gasoline and food costs dropped. Tourism continues to be the primary driver of growth in Cabo Verde, but poverty levels remain higher than before pre-pandemic levels. The fiscal condition has improved, with the deficit falling to -0.3% of GDP, owing to increased tax revenues. However, fiscal risks associated with SOE performance continue to be a source of worry.
In 2024, real GDP growth is forecasted to be constant at 4.7%. However, considerable risks remain, including potential commodity price hikes, decreased foreign demand in tourism markets, and slow progress on the SOE reform agenda. Climate change remains a threat, owing to the country’s susceptibility.
Cabo Verde, being a small island developing state, presents unique problems as well as significant potential as a result of its extensive Exclusive Economic Zone. For example, the government is focusing on the development of its blue economy to boost economic growth and enhance livelihoods while protecting marine ecosystems.
In the framework of the blue economy, Cabo Verde’s economic update views artisanal fishing as critical to food security, despite the constraints of overfishing and limited infrastructure. Improvements in fisheries governance and infrastructure might help this industry. Aquaculture has enormous promise, but it requires investment, training, and technical assistance.
According to Rosa Brito, World Bank Economist and report’s main author, “The sustainable development of the blue economy is critical to diversifying Cabo Verde’s economy and increasing its resilience.” This necessitates responsible management of marine resources, advances in data collecting and statistical capabilities, and the adoption of integrated policies that support industries such as maritime transportation and renewable energy. Cabo Verde is committed to leveraging these potential into long-term economic prosperity that benefits its people and protects the environment.
(Source: The World Bank)
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