Fitch Ratings predicts continued high growth, investment in Cape Verde

2 January 2006

Cidade da Praia, Cape Verde, 2 Jan – Economic growth and foreign investment will show continuing healthy expansion in Cape Verde in the medium term and help ease the country’s overseas debt burden, says financial consultancy Fitch Ratings.

It its recent report, “The Sun Shines on the Archipelago”, Fitch maintains its B+ credit rating for Cape Verde – on a par with Venezuela and Uruguay and above Mozambique and Brazil – for the islands.

“Strong economic growth” of between 5 and 6 percent will continue with rising foreign investment to result in accumulation of foreign reserves and a reduction in public sector debt to 1.5 percent of GDP, says Fitch.

Cape Verde’s economy enjoyed better than expected growth in 2005 with boosted earnings from tourism, increased remittances from expatriate workers and rising direct foreign investment, the report adds.

Privatization and liberalization of some sectors, as well as stability of the euro-linker Cape Verdean escudo have fueled the archipelago’s recent economic expansion, Fitch notes, as well as fiscal reforms such as the implementation of sales tax

Cape Verde’s continuing economic expansion rests on political stability, the service sector, a currency system supported by Portugal and progress in liberalizing the economy.

The islands’ main economic frailties are identified by Fitch as high levels of foreign state debt, a high trade deficit dependent on imports, as well as reliance on expatriate remittances and foreign aid.

Imports will climb to reach a value of US$ 468 million by 2007 with exports of US$ 64 million to give Cape Verde a trade gap of US$ 404 million, twice the level recorded in 2001, Fitch forecasts. (macauhub)