Located 500km off the west coast of Africa, Cabo Verde is a ten-island archipelago, nine of which are inhabited. With a population of about 491,233 (2021 Census), only 10% of its territory is classified as arable land and mineral resources are limited.
The fragmentation of its territory creates significant connectivity issues, as well as challenges for service delivery, including energy, water, education, and health.
Cabo Verde has witnessed significant economic progress since 1990, driven in large part by the rapid development of tourism (25% of GDP), coupled with considerable social development due to strong social policies since the 1970s.
Until 2019, Cabo Verde was considered one of the champions among Sub-Saharan African countries in terms of poverty reduction but is currently challenged by the impacts of COVID-19 and the Ukraine crisis. Poverty projections based on economic growth suggest that poverty rates, measured by the $5.5 a day (2011PPP) poverty line, declined by 6 percentage points between 2015 and 2019, from 41% to 35%.
Cabo Verde is considered an example of democracy in Africa, largely due to its political stability. Electoral processes have been held regularly, with peaceful alternation of power between the two major parties. The African Party for the Independence of Cabo Verde (PAICV) responsible for colonial liberation, of leftist ideology, governed for two 15-year periods (1975-1991 and 2001-2016). The Movement for Democracy (MpD), a liberal and right-wing party was re-elected for a five-year term in the legislative elections of April 2021 with Ulisses Correia e Silva reappointed as Prime Minister. The Independent and Democratic Cabo Verdean Union (UCID) represents the third political force in the country.
The PAICV-supported candidate, José Maria Neves, was elected president on October 17, 2021, and took office on November 9, 2021.
Cabo Verde conducted three peaceful elections, with electronically transmitted results, between October 2020 and October 2021.
The next elections to be held in Cabo Verde will be municipal elections, which will take place in 2024. Of the 22 municipalities in Cabo Verde, MPD holds the majority (14), while PAICV holds eight. The next legislative and presidential elections will be held in 2026.
Economic activity is estimated to have expanded by 15% in 2022, with per capita incomes surpassing pre-pandemic levels (2019). On the supply side, accommodation, transport and commerce explained 60% of growth. On the demand side, exports (mainly tourism) and private consumption accounted for 90% of growth. The rebound in economic activity in 2022 was accompanied by a reduction in poverty (0.8%age points to reach 19.3% in 2022), despite the spike in inflation. Headline inflation reached 7.9% (y/y) in December 2022 after inflationary pressures emerged in 2021, fueled by high international oil and food prices and global supply chain disruptions due to the war in Ukraine.
The fiscal deficit narrowed to 3.8% of GDP in 2022, supported by the strong economic performance and increased fiscal revenues. Public debt declined from 142.7 to 126.2% of GDP, driven by GDP growth. Total revenue increased 39%, driven by personal income and VAT taxes, while total expenditure increased 20.6%, reflecting higher current expenditure, estimated at 4.2% of GDP, to protect the most vulnerable from rising food insecurity and to control fuel and energy prices. The social protection system, through cash transfers, supported the most vulnerable.
Real GDP growth is projected to reach 4.8% in 2023 (3.8% in per capita terms). Over the medium term, private consumption, investment in tourism and the blue economy should support growth. The outlook is subject to substantial downside risks stemming from uncertainties due to the war in Ukraine, mainly through inflation and its impact on private consumption, slow global growth, particularly in Europe, delayed structural reforms to manage fiscal risks, and climatic shocks. Inflation is expected to moderate in 2023, as global growth moderates, commodity prices stabilize, and supply bottlenecks ease.
The authorities are committed to gradual revenue-driven fiscal consolidation over the medium-term, which includes enhanced management of fiscal risks, revenue mobilization, and the waning of exceptional shock measures. Consequently, the fiscal deficit is projected to reach 2% of GDP by 2025 and the public debt-to-GDP ratio to improve from 126.2% in 2022 to 106% by 2025. Fiscal risks will remain high as the fiscal deficit is exposed to contingent liabilities in sectors particularly vulnerable to external shocks.
Last Updated: Mar 30, 2023