Cape Verde: 2008 to be best year of the decade for archipelago

12 November 2007

Praia, Cape Verde, 12 Nov – The 2008 year for Cape Verde already represented entry into the group of medium development countries and the long-awaited partnership with the European Union but, according to the archipelago’s central bank, it will also be the biggest growth year of the decade.

In the government’s latest report, published last week, the Bank of Cape Verde expects growth of between 6.5 and 7.5 percent next year, speeding up from the 6.4 percent growth expected for this year, against a backdrop of the archipelago maintaining its strengthening financial position.

“The main factor for expansion of economic activity remains private investment, and we expect deceleration in public investment,” the central bank said in the report presented to the government in Praia.

Growth could be much greater, if it were not for the negative contribution from foreign demand, in the order of at least 6.2 percent, which is slowing the impetus of private investment and consumption, which are showing growth of 17 and 16.1 percent, respectively.

The 7 percent average growth for the gross domestic product (GDP) for next year was only matched in 2000, when the Cape Verdean economy grew 7.3 percent, having slowed its growth from then, to then start speeding up its growth starting in 2004.

“The rate of expansion of economic activity shows that the main investments that have been made in the country are focused on the services sector (a category which accounts for around 70 percent of national production) and, particularly, the tourism sub-sector, the current driver of economic growth,” the bank said.

“As a result of the dynamism shown in this sector there was a rise in exports of services,” which this year are expected to see growth of around 45 percent, wit tourist trips representing 61 percent of the total.

According to the most recent forecasts from Cabo Verde Investimentos, the number of tourists is expected to total 320,000 at the end of the year and by 2012 the archipelago is expected to have more visitors (500,000) than the resident population.

With the contribution of services, the growth of exports is expected to increase from 13.2 percent this year to 16.3 percent, with imports growing at a stable rate, at 13 percent.

In its report the bank noted the existence of “inflationary pressures” both on a domestic and external level, especially due to “excess liquidity,“ but projects that next year inflation will fall to between 2 and 4 percent.

This year, the consumer price index is expected to reach 5.1 percent, “a revision in relation to the projection for last March,” which “reflects both the bad farming year on food goods, and the impact on energy of the latest fuel price increases,” the central bank noted.

In relation to the archipelago’s financial situation, it added, figures point to “a general improvement of external sustainability.”

International reserves are expected to continue accumulating in 2008, to a stock of 346 million euros, which is equivalent to 3.8 months of imports of goods and services expected for 2009.

From January 2008, Cape Verde will become the first Portuguese-speaking African country and one of the few on the continent to be classified as a Medium Development Country, according to a decision of the Economic and Social Council (Ecosoc) of the United Nations.

Provided its does not meet with any last minute obstacles, next year a partnership between the archipelago and the European Union is due to be made official.

The agreement has been submitted to the European Parliament for ratification and is due to be definitively approved at the next meeting of the Council for General and Foreign Affairs, due to take place in Brussels on November 19 and 20. (macauhub)