Country Report Cape Verde January 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. The government plans to provide a fiscal stimulus to offset the negative effects that an expected sharp slowdown 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 robust at 4% in 2009, as public spending supports investment in infrastructure and the agricultural sector expands. Real GDP growth is forecast to rise moderately to 5% in 2010, driven by a recovery in the tourism and construction sectors. Average inflation is forecast to fall from an estimated 6.9% 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

Revelations about money-laundering in a Cape Verdean offshore bank have hurt the government, as MrNeves has been accused of having links with the owners of the bank. The opposition Movimento para a Democracia (MPD) has reverted to a strong confrontational stance in the hope of taking advantage of the government's growing difficulties.

Economic policy

The 2009 budget, which projects a 17% rise in public spending to provide a fiscal stimulus to the economy, has been approved. The budget also intends to boost capital expenditure, and significant cuts in corporate taxes have been included to support activity in the private sector.

The domestic economy

According to the latest economic surveys, confidence in the construction and manufacturing sectors has declined owing to a substantial drop in new orders. The government has approved a new law to combat money-laundering, which increases the level of co-operation required by key players in thesector.

Foreign trade and payments

Foreign direct investment (FDI) inflows are believed to have fallen in 2008, especially since a large proportion of FDI was concentrated in the sector of tourist homes, which has already shown signs of weakening. Remittances from emigrants have also declined.

This report covers the following industry codes:
SIC Code: 60;49;82;47;1;10;59;39
NAICS Code: 52;22;61;48;11;212;44;31