Cabo Verde has demonstrated resilience in its post-COVID-19 recovery, yet the crisis underscored vulnerabilities, including reliance on tourism and risks from underperforming State-Owned Enterprises (SOEs). Climate change is intensifying these weaknesses.
The World Bank's report, Cabo Verde Economic Update 2024, evaluates the Cape Verdean economy in 2023, projects scenarios for 2024, and suggests policy options to accelerate fiscal consolidation, reduce debt vulnerabilities, and foster sustainable growth in the blue economy. This approach aims to enhance resilience against climate and economic shocks.
In 2023, economic growth slowed to 5.1%, with tourism returning to pre-pandemic levels. Inflation dropped to 3.7% due to lower fuel and food prices. Despite tourism being the main growth driver, poverty remains above pre-pandemic levels. The fiscal position improved with a deficit reduction to -0.3% of GDP due to increased tax revenues. Nonetheless, fiscal risks tied to SOE performance remain a concern.
Real GDP growth is projected to stay stable at 4.7% in 2024; however, significant risks persist. These include potential rises in commodity prices, weaker external demand in tourism markets, and limited progress on SOE reform. Climate change also poses a threat given Cabo Verde's high vulnerability.
As a Small Island Developing State, Cabo Verde faces unique challenges but also significant opportunities through its extensive Exclusive Economic Zone. The country is prioritizing blue economy development to promote economic growth and improve livelihoods while preserving marine ecosystems.
Regarding the blue economy, artisanal fishing is considered vital for food security despite challenges such as overfishing and inadequate infrastructure. Enhancements in fisheries governance and infrastructure could boost this sector. Aquaculture also holds significant potential but requires investment, training, and technical support.
Rosa Brito, World Bank Economist and lead author of the report stated: “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."