CABO VERDE
Table 1

Key conditions andchallenges
2023

Population, million

0.5GDP, current US$ billion

2.5

GDP per capita, current US$4968.9

International poverty rate ($2.15)

a4.6
a19.3

a50.9

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a42.4

School enrollment, primary (% gross)

b97.0

b74.1

Total GHG emissions (mtCO2e)0.7Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2015), 2017 PPPs.
b/ WDI for School enrollment (2019); Life expectancy(2021).

Growth is expected to have slowed to
4.8 percent in 2023 despite exports,
mainly tourism, returning to pre-pandemic levels. Inflation stood at 3.7 percent, aided by declining fuel and foodprices. Growth-friendly fiscal consolidation should allow stable growth of 4.7
percent over the medium term, though theoutlook remains subject to downside risks
from commodity price spikes, weaker external demand, limited progress on key
SOE reforms, and climate shocks.

Cabo Verde is a small, and vibrant island
nation with an open economy. Its economic growth has been driven by tourism, remittances, and foreign direct investment enabled by structural reforms and social andpolitical stability. The development model
has shown signs of fatigue since the 2008
global financial crisis: growth fell from a robust average 7.5 percent in the 2000s to 2.8
percent in the last decade (excluding 2020)
and is highly volatile. The impact of the pandemic accentuated debt risks and underscored key vulnerabilities, including thedominance of the tourism sector, absence ofbuffers to shocks, and poor performing
State-Owned Enterprises (SOE).
Achieving higher and sustained growth requires reforms to reduce the economy’s vulnerabilities to external economic and climate-related shocks; increase private sector
productivity to benefit from the thriving
tourism sector; and reduce internal transport costs and market fragmentation. A
gradual transition to blue (ocean related)and green (environment related) activities
are policy priorities for the medium term.

Recent developments
Economic growth is estimated to haveslowed to 4.8 percent in 2023 (4.2 percent inper capita terms), reflecting the stabilizationof service exports after the post-covid
tourism rebound. On the supply side, accommodation, transport, and commercedrove growth, while on the demand side,growth was led by exports and private
consumption. Growth was accompanied
by a 0.9 percentage points reduction inpoverty (using the US$3.65 per person
and per-day-2017 PPP).
Headline inflation decelerated to 3.7 percent (y/y) in 2023 from the high of 7.9 percent in 2022, driven by the easing of international food prices and falling oil prices.
Food inflation, which represents 25 percent of the CPI basket, slowed to 8.9 percent while energy inflation decreased by
3.2 percent on average. Core inflation
reached an annual average of 2.3 percent.
Poverty ($3.65 per day PPP 2017) is expected to reach 15.1 percent in 2023, downfrom 16.0 percent in 2022, but above its
2019 pre-pandemic level of 14.1 percent.
Economic growth was fundamental forpoverty reduction in 2023, coupled witha decrease in inflation compared to 2022.
Growth of the services sector led to creation of new jobs, especially in tourism,
but the household real income benefits
were dampened by inflation pressures,
especially in food items.
Increased revenues and under executionof the capital budget narrowed the fiscal
deficit to 0.5 percent of GDP in 2023 from
4.3 percent in 2022. Revenue increased byabout 20 percent over the same period driven by corporate income tax and VAT collection, as well as revenues linked to theairport private concession. Total expenditure increased by 2.6 percent. Public debt
declined from 127.1 percent in 2022 toFIGURE 1 Cabo Verde / Real GDP growth and inflation

FIGURE 2 Cabo Verde / Actual and projected poverty rates
and real GDP per capita

Percentage
40Poverty rate (%)

Percentage
40303020201060

500000400000400-10600000

50100

Real GDP per capita (constant LCU)

70

300000-20-1030-30-20

20-40
2019Q1 2019Q4 2020Q3 2021Q2 2022Q1 2022Q4 2023Q3-30

10200000
100000

0Real GDP growth (lhs)
Food and beverages inflation (rhs)Headline inflation (rhs)
Energy inflation (rhs)02007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Source: Government of Cabo Verde.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real GDP pc

Source: World Bank. Notes: see Table 2.

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115.3 percent in 2023, driven by GDPgrowth. External debt is mainly concessional, at 105 percent of GDP, while domestic debt has surged to over 30 of GDP
post-COVID-19, driving the high risk ofoverall debt distress.
The current account deficit (CAD)widened from 3.4 percent of GDP in 2022
to 5.3 percent in 2023, due to the slowdown
in exports of goods and services, mainly
tourism, and remittances compared to2022. The CAD was financed primarily by
FDI and concessional loans, while international reserves remained at a comfortable
5.8 months of import coverage.

OutlookReal GDP growth is projected to remain
relatively stable in 2024, at 4.7 percent (4.2percent in per capita terms). Over the
medium term, growth will be supportedby the implementation of structural reforms aimed at improving public sector
efficiency and the business environment.

Inflation is expected to decline further to
2.7 percent in 2024, as global inflation
the international price shock continues tosubside, and converge to around 2 percent over the medium term, supported by
the strong nominal anchor provided by
the peg to the Euro.
Poverty (using US$3.65 per day-2017
PPP) is projected to decline to 14.9 percent in 2024 driven by the services andindustry sectors, and a moderation of inflation. Projections for 2025 suggest a further decline in poverty to 14.2 percent,aligning with the pre-pandemic level,with this downward trend continuing into
2026 to reach 13.4 percent.
Overall fiscal balance is projected to widen
to -3.0 percent of GDP in 2024, reflecting
the increase in total expenditure with staff
salary updates, increases in social benefits
and acquisition of goods and services, andsound execution of public investments.
Tax revenue collection will remain strong,with a review of tax benefits and the continued implementation of measures to improve tax administration efficiency andbroaden the tax base. Continued efforts toTABLE 2 Cabo Verde / Macro poverty outlook indicators

mobilize domestic revenue and containcurrent expenditure will reduce the fiscal
deficit to just above 1 percent of GDP
by 2026. The public debt-to-GDP ratio isexpected to improve to 102.1 percent by2026 but continued management of fiscal risks related to SOE arising from loan
guarantees remains critical.
Stronger import growth vis-à-vis exports,
with the continued dynamism of economic
activity, will increase the CAD to 6.2 percent of GDP in 2024. CAD is projected todecline to 5.7 percent of GDP in 2026 supported by stronger growth in tourism andremittances, which, together with higher
FDI inflows, will help maintain international reserves at about 6 months ofprospective imports.
The outlook is subject to substantial downside risks stemming from new commodity
price spikes due to geopolitical shocks,
weaker external demand in tourism markets, and limited progress with the SOE reform agenda, which could undermine thefiscal consolidation and weaken growth.
Climate-related shocks will remain a concern, given the country's high vulnerability.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
5.6
1.45.3
23.4
2.1
7.7

2022
17.1
25.9
-4.6
-54.2
97.5
12.7

2023e
4.8
6.5
0.5
-2.4
4.4
3.4

2024f
4.7
8.8
20.4
-19.1
8.6
12.5

2025f
4.7
8.6
0.9
-6.5
9.2
9.5

2026f
4.6
8.1
2.7
1.8
9.5
11.4

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

5.6
3.1
13.2
4.4

17.1
-14.3
7.5
21.9

4.8
-2.0
7.7
4.7

4.7
-2.3
5.2
5.1

4.7
2.6
5.5
4.7

4.6
2.7
5.4
4.6

Inflation (consumer price index)

1.97.9

3.7

2.7

2.1

1.9

Current account balance (% of GDP)Net foreign direct investment inflow (% of GDP)

-12.2
4.6-3.4
4.7-5.3
4.0-6.2
3.9-6.5
3.7-5.7
3.6

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-7.7
23.9
152.0
-5.5

-4.3
22.4
127.1
-2.0

-0.5
24.6
115.3
1.8

-3.0
28.3
112.0
-0.7

-2.2
27.4
107.7
0.0

-1.1
26.3
102.1
1.1

4.7
19.7
51.8

3.7
16.0
45.7

3.5
15.1
42.4

3.5
14.9
41.9

3.5
14.2
40.1

3.1
13.4
38.5

-3.5
84.5

-1.2
85.0

5.3
85.2

6.4
85.6

6.7
86.0

6.6
86.5

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2015-IDRF. Actual data: 2015. Nowcast: 2016-2023. Forecasts are from 2024 to 2026.
b/ Projections using microsimulation methodology.

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