Fitch Ratings has given Cape Verde’s long term debt a B+ credit rating and warned of the possibility that the rating could be aggravated by the island country’s high public and private debt.
In a statement released on Monday, Fitch explained that diversifying Cape Verde’s economy to other activity sectors besides just tourism could help improve the country’s credit rating.
The global rating agency added that the B+ grade was justified by good institutional performance and good governance of the country, as confirmed by recent elections, which have fostered a stable macroeconomic environment and high Gross Domestic Product (GDP) growth.
But it warned that the rating is limited by high and growing levels of public debt (76% of GDP) and foreign debt (95% of GDP), which reflect a recent high budget deficit (8.8% of GDP in 2011) and a structural imbalance in the current balance (15.1% of GDP in 2011), aggravated by a plan for major public investments to meet development needs.
Despite the economic slowdown in Europe, which provides 90% of Direct Foreign Investment, 80% of tourists and 80% of remittances, GDP growth was supported by higher numbers of tourists (+25%) and increased remittances (+24%) from Cape Verdeans living abroad.
Fitch Ratings also indicated that it expected those trends to continue and that GDP should grow by nearly 5% in 2012 and 2013. (macauhub)