Cabo Verde's Economy Grows 6.3%, but Island Connectivity Hinders Development, World Bank Warns
Cabo Verde's Gross Domestic Product (GDP) experienced a significant growth of 6.3% in 2025, driven by a surge in tourist arrivals, expansion of service exports, and increased investment, according to the latest Cabo Verde Economic Update 2026. The World Bank projects a slowdown to 4.8% in 2026, attributing this to the normalization of tourism recovery and the global economic impact of Middle Eastern tensions. Tourism remains the primary economic engine, successfully reducing the poverty rate from 53.8% to 51.2% and lifting approximately 12,000 people out of poverty. Unemployment has fallen to 6.2%, though youth unemployment and underemployment remain high. Public finances show a positive trend, with Cabo Verde achieving a budget surplus of 1% of GDP in 2025, the first since 2007. Record tax revenues and a continued decrease in public debt, which stood at 100.7% of GDP by the end of 2025, further bolster the fiscal picture. Despite these achievements, the World Bank notes that the substantial burden of debt servicing continues to constrain the state's financial flexibility. The country's external position has also strengthened, marked by a second consecutive current account surplus, historically high international reserves of 975 million euros, and a robust, well-capitalized financial system.
The World Bank's report highlights a dual economic reality for Cabo Verde: robust headline growth fueled by tourism, yet a persistent structural impediment to more equitable development. The analysis points to inter-island connectivity as a critical bottleneck, preventing the integration of domestic markets, hindering labor and business mobility, and limiting the development of national value chains. While reforms in the transport sector, including private sector participation and competitive contracting, are proposed to enhance reliability and reduce state financial exposure, the effectiveness of these measures will depend on their implementation and the ability to overcome entrenched logistical challenges. External risks, including global economic slowdowns and climate change vulnerability, also necessitate a diversified and resilient economic strategy that moves beyond tourism dependency and addresses internal structural weaknesses.
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