Key Development in the Country and the regional context
Cabo Verde’s economy rebounded strongly in 2022 due to a dynamic tourism sector, returning to pre-COVID-19 levels. The GDP grew by 17.7% this year, surpassing previous projections. This growth led to an improvement in public revenues and a decrease in the ratio of public debt to GDP, which dropped from 146.6% in the first quarter to 131% in October 2022. Although the economic outlook for Cabo Verde remains positive, mainly driven by the tourism sector, it is subject to several risks as the economy is dependent on developments in the global economy, particularly in countries that are tourist markets for Cabo Verde. In October 2022, the new Authority for Competition Law and Policy (AdC) took office, opening a new chapter to build market trust through fair competition and consumer protection.
Extreme poverty had been decreasing rapidly in Cabo Verde before the COVID-19 crisis, dropping from 23.7% in 2015 to 12.7% in 2019. However, the economy contracted by 14.8% in 2020, leading to a 25% increase in unemployment and a rise in extreme poverty to 13.1%, with national poverty increasing from 25% to 31.2%. As response, in 2022, the Government renewed its determination to eradicate extreme poverty by 2026 (National Strategic Programme for Sustainable Development - PEDS II - 2022-2026) and has prepared a National Strategy to Eradicate Extreme Poverty (ENEPE – 2022-2026) focused on expanding social protection for the most vulnerable.
Food insecurity and malnutrition (with a high prevalence of stunting and wasting among children under 5 years old) remain a public health issue in Cabo Verde. This is partly the result of imported inflation on food prices, but also less agricultural production due to recent droughts.
The country’s lack of arable lands and freshwater and its exposure to extreme weather events make it particularly vulnerable to the impact of climate change on agriculture.
In 2022, the Government declared a State of Calamity in 18 out of 22 municipalities and deployed measures to support affected households, particularly in rural areas. Subsidy programmes for essential goods and direct transfers to vulnerable families helped mitigate the impact of higher food prices due to the War in Ukraine.
Human capital continues to be a high priority in Cabo Verde, as reflected in positive trends in several indicators under SDGs 3 and 4, despite the COVID-19 pandemic. The country’s new Parity Law, efforts to reduce Gender Based Violence and socioeconomic inequalities are consolidating gender equality in Cabo Verde into a regional best practice.
Access to an improved source of drinking water is available to 86% of the population, and at least basic sanitation is available to 82.9% of the population (92% rural, 73.2% urban).
National efforts to mitigate the impact of the COVID-19 pandemic and the War in Ukraine were determinant to support the ongoing economic and social recovery in Cabo Verde. Considering the current global economic scenario and additional risks of higher inflation, fiscal support measures targeting lower income families will continue to be important in 2023. Cabo Verde plans to expand social protection measures and increase the minimum wage. However, considering pressures for fiscal consolidation due to the high public debt accumulated during the pandemic years, alternative sources of financing and external support will be crucial. It will be necessary to explore new opportunities for foreign investment(2), strengthening the tourism sector, and exploring other sectors with high growth potential.