Cabo Verde's economy is recovering well from the enormous challenges posed by the COVID-19 pandemic. However, the crisis has highlighted the country's inherent weaknesses, from heavy dependence on tourism to the lack of buffers for economic shocks and the inherent risks in the SBS. The impacts of climate change exacerbate these vulnerabilities.
Against this backdrop, the entitled Blue Economy: The Latent Potential of Fisheries and Aquaculture in Cabo Verde, analyzed the state of the economy in 2023 and made projections for 2024, seeking to assess the short-term economic outlook of the country and offer policy options to strengthen the economy.
Recent Economic Developments
Economic growth slowed to 5.1% in 2023, despite the return of exports, especially in tourism, to pre-pandemic levels. Inflation also fell to 3.7%, driven by the fall in fuel and food prices. Tourism continues to lead growth, but other sectors, such as transportation and public administration, also contribute significantly. However, the country still faces challenges in relation to poverty, with higher levels than before the pandemic.
Fiscal consolidation efforts have proved successful, with the budget deficit reduced to -0.3% of GDP in 2023. However, the continued dependence of State-Owned Enterprises (SOE) on government support poses considerable fiscal risks. Public debt has also fallen to 113.8% of GDP, but despite the improvement, it remains high.
Forecasts point to stable real GDP growth in 2024, at around 4.7%, supported by structural reforms and inflation that should fall further. However, the country faces considerable risks, including potential increases in commodity prices, weak external demand in tourism and limited progress in SBS reforms. In addition, climate-related shocks remain a major concern.
Excessive dependence on tourism leaves Cabo Verde vulnerable to external shocks, especially when climate change exacerbates these risks. To ensure sustained growth, urgent reforms are needed to mitigate this vulnerability, with a focus on the transition to more sustainable and resilient economic activities, particularly within the framework of the "blue economy".
Exploring the Potential of the Blue Economy
As an archipelago country, Cabo Verde has a unique opportunity to develop its blue economy by harnessing marine resources in a sustainable way. This includes the fishing sector, which plays a vital role in the economy, but faces challenges such as overfishing and inadequate infrastructure. Aquaculture is also seen as holding significant promise but requires investment and technical assistance.
To realize this full potential, responsible management of marine resources is essential, requiring investments in infrastructure, governance and statistical capacity. Only with an integrated and sustainable plan can Cabo Verde truly take advantage of the opportunities offered by its vast Exclusive Economic Zone and ensure a more resilient and prosperous economic future.