Current Developments in Cape Verde
Economy
Despite Cape Verde's very limited natural resource, it is economically stable and has progressed from "least developed" to "lower middle income" country status. This results from its economic growth since the late 1980s, implementation of a poverty alleviation programme and structural reforms. Cape Verde enjoys a good relationship with the World Bank and IMF, and receives bilateral aid from a number of countries. There have been concerns that the improved status will adversely affect aid inflows.
GDP grew at a real average rate of 8.3% from 1997 to 2001. Growth continued in subsequent years, as can be seen in the key economic indicators for 2001 to 2005 that are summarised in the table below.
| 2001 | 2002 | 2003 | 2004 | 2005 | |
| GDP Real % Growth | 3.5 | 5.5 | 4.7 | 5 | 6.4 |
| GDP per Capita US$ | 1,571 | 1,649 | 1,761 | 1,814 | 1,930 |
| Inflation (CPI) % | 3.7 | 1.9 | 1.6 | -1.9 | 0.4 |
| Unemployment % | 19.1 | 16.7 | 16.7 | 16.7 | n/a |
Cape Verde's economy is dominated by the service sector, including tourism. Tourism's contribution to GDP has increased from 9% in 2000 to 11% in 2005. The following table shows the breakdown of GDP by broad economic sector in 2000 and 2004. Agriculture's importance was markedly lower in 2004 compared with 2000.
| % of GDP | ||
| Sector | 2000 | 2004 |
| Agriculture | 12.2 | 6.8 |
| Industry | 17.9 | 20.2 |
| Services | 70.1 | 73 |
| Total | 100 | 100 |
Cape Verde is very heavily dependent on imports of goods and services, which were equivalent to 64% of GDP in 2004. Exports of goods and services were quantified as 31% of GDP. Exports, which are limited, include clothing, footwear, minerals, fish and services. The major trading partner is Portugal, which accounted for 60% of imports and 41% of exports in 2004.
Cape Verde is working to strengthen its relations with the European Union. It is also trying to develop closer economic ties with Brasil. Cape Verde has trade agreements with the EU, USA, Canada, ECOWAS states and Portuguese speaking countries (Portugal, Angola, Brasil and Mozambique). The major trading partners in 2004 are summarised in the following table.
| Exports by Value | Imports by Value | ||
| Destination | % of Total | Source | % of Total |
| Portugal | 60.2 | Portugal | 40.7 |
| USA | 18 | USA | 12 |
| UK | 11.5 | UK | 8.1 |
| Denmark | 2.1 | Denmark | 5.1 |
| Germany | 1.7 | Germany | 4.1 |
| Other Countries | 7 | Other Countries | 30 |
| Total | 100 | Total | 100 |
The trade deficit averaged 35.2% of GDP from 1997 to 2001. In subsequent years the deficit peaked at 38.0% of GDP in 2002, and was approaching 36% of GDP in each of the three subsequent years. The negative trade balance is compensated by workers remittances from overseas, estimated to be equivalent to over 20% of GDP, and bilateral and multi-lateral aid.
Cumulative inward foreign direct investment increased from US$4 million in 1990 to US$173 million in 2000 and US$228 million in 2004. The growth in annual and cumulative inward foreign direct investment from 2001 to 2004 is summarised in the following table. Tourism has attracted a significant proportion of foreign direct investment. Overall investment averaged 34.3% of GDP from 1997 to 2001, and then in subsequent years fluctuated between 31.0% of GDP in 2003 and 38.4% of GDP in 2005. Investment incentives have facilitated attraction of investments.
| Inward FDI US$ Millions | ||
| Annual | Cumulative | |
| 2001 | 9 | 182 |
| 2002 | 12 | 194 |
| 2003 | 13 | 207 |
| 2004 | 21 | 228 |
The Cape Verde Escudos (CVE) is pegged to the Euro at the rate: €1 = 110.3 CE.
Cape Verde has experienced significant economic growth in recent years and this is expected to continue. IMF forecast GDP to increase by at least 7% in 2006, with investment increasing to the equivalent of 42% of GDP. However, the trade deficit is forecast to increase to the equivalent of almost 38% of GDP. IMF and the Government have identified tourism and fisheries as the two major opportunity sectors of the economy.