Standard & Poor’s lowers Cape Verde’s outlook to “negative”

24 June 2013

Risk rating agency Standard & Poor’s (S&P) lowered its outlook for Cape Verde from “stable” to “negative” despite keeping the West African archipelago’s long term credit rating at “B+” and its short term rating at “B”, according to a statement issued Friday.

S&P’s decision follows a similar one from Fitch Ratings, which also lowered the outlook for Cape Verde from stable to negative, due to lower than expected growth of the archipelago’s gross domestic product (GDP).

Adding that according to the new methodology, Cape Verde’s estimated gross domestic product in the five years ended in 2012 now stands at 2.6 percent compared to a previous calculation of 5.1 percent, Fitch Ratings lowered its long term rating on Cape Verde’s debt in foreign currency from “BB-” to “B+” despite keeping the short term foreign currency debt rating unchanged at “B”.

In its statement S&P said that high budget deficits had led to debts levels that were higher than previous estimates and had weakened Cape Verde’s ability to respond to exogenous shocks.

Noting the lack of reliable data on Cape Verde’s GDP, S&P said that the archipelago’s economy was expected to have contracted by 0.5 percent in 2012 and said that this year it expected an even greater contraction due to a drop in pubic investment and in private consumption that will not be offset by growth in tourism.

“We believe that the economy will see an upturn in 2015, with growth of 2.9 percent in real terms and per capita GDP rising 1.4 percent,” the credit rating agency said. (macauhub)