Country Report Cape Verde April 2009

Outlook for 2009-10

The ruling Partido Africano da Independencia de Cabo Verde (PAICV) and the prime minister, Jose Maria Neves, are expected to remain in power in 2009-10. However, the government will come under increased pressure, as the global economic crisis will affect the country's economic performance and lead to rising unemployment. The government plans to provide a fiscal stimulus to offset the negative effects that an expected contraction in the tourism and construction sectors will have on domestic consumption levels. Real GDP growth is forecast to fall significantly owing to a contraction in the tourism and tourist home sectors, but it will remain positive at 1% in 2009 as public spending supports investment in infrastructure and the agricultural sector expands. Real GDP growth is forecast to rise moderately to 3.5% in 2010, driven by a recovery in the tourism and construction sectors. Average inflation is forecast to fall from 6.8% in 2008 to 3.5% in 2009, reflecting lower oil and food prices in international markets, before increasing to 3.8% in 2010 as commodity prices start rising again.

The political scene

The National Assembly has set up a bipartisan commission charged with drawing up proposals for revising the constitution, which is due to be debated in May. According to data released by the Ministry of Justice and the judicial police, violent crime is on the rise in Cape Verde, driven by an increase in drug trafficking and high youth unemployment. In response, the government is investing heavily in boosting resources for the police and security services.

Economic policy

A new comprehensive household survey has revealed that the incidence of poverty fell from 36.7% in 2002 to 26.6% in 2007, providing strong endorsement for the government's poverty-reduction strategy. However, there is widespread geographical variation across different islands, poverty levels remain much higher in rural than in urban areas, and levels of income inequality have remained broadly unchanged.

The domestic economy

Cape Verde's mobile-phone sector has continued to expand rapidly, growing by 83% in 2008, owing to the start-up of a second mobile-phone operator, T+, in December 2007 and the lowering of tariffs, which has made mobile-phone services more affordable.

Foreign trade and payments

The Brazilian government has agreed to convert US$4m of external debt owed by Cape Verde into development aid, ending a long-running dispute.

This report covers the following industry codes:
SIC Code: 60;49
NAICS Code: 52;22