Cape Verde “has conditions” to grow “above” 4.8% in 2023, says government

Cape Verde’s Deputy Prime Minister, Olavo Correia, said today, November 2, that the State Budget for 2023 focuses on economic recovery and considered that if the country takes advantage of opportunities, it “has conditions” to grow “above” the projected 4.8%.

“We are forecasting a growth for 2023 of 4.8%, depending on the evolution of the external scenario, but we have conditions to grow above this if the external scenario does not deteriorate and we make good use of the windows of opportunities that we have,” said the also Minister of Finance, when being heard by the Specialized Committee on Finance and Budget (CEFO) of the National Assembly, in the scope of the Draft State Budget Law for 2023.

For number two in the government, the growth forecast of 4.8% is “moderate”, already with greater tourism dynamics, but may be adjusted, depending on the international context.

As a reference, the also Minister of Business Development recalled the historical recession of about 15% in 2020 due to the effects of the covid-19 pandemic, but reversed in 2021, with a 7% growth, while for this year, he expects growth “between 8% and double digits”.

In his speech, Olavo Correia reaffirmed that the State Budget for next year focuses on economic recovery but is still conditioned by uncertainties at the external level.

And for next year, he pointed out as major priorities the acceleration of the reform agenda, namely in the digital and energy transition, the circular economy, the blue economy, the mobilization of the diaspora, and the consolidation of democracy in the country.

As for inflation, the forecasts point to 7.9% this year, which decreases to 3.7% in 2023.

For next year, the Deputy Prime Minister also predicted a reduction in the budget balance in the order of 5.6% of the Gross Domestic Product (GDP), down from 7.5% in 2021, 9.1% in 2020, and 6.3% this year.

“We have to signal to the market that we are working in this direction,” said the minister, heard by the specialized commission, chaired by MP António Fernandes, from the parliamentary group of the African Party for the Independence of Cape Verde (PAICV, opposition).

He also emphasized the reduction of public debt over the last years, reaching 133% of the gross domestic product (GDP) next year, against 138% this year, considering it is important for the country to continue on this path.

The Vice-Prime Minister also underlined the confidence in the country, in its governance and its institutions, despite the crises, of development partners, of investors, and also of the emigrants, whose deposits represent 30% of the GDP and remittances reach 15% of the country’s wealth, three times more than foreign direct investment.

“In other words, we can only guarantee the free convertibility of the Cape Verdean escudo and the free circulation of capital (…) with a stable macroeconomic framework. This is an extremely important asset for our country,” emphasized Correia, for whom the budget aims to make a “great contribution” to the consolidation of the Cape Verdean nation.

According to the government’s most recent budget forecasts, Cape Verde expects gross domestic product (GDP) growth of 4.8% in 2023 and 4% this year.

Among the various measures in the document, and pointed out by the Deputy Prime Minister, are the increase of the tourism tax by US$0.50 to finance measures to combat poverty, or the allocation of social pension to 3,000 elderly people without income, outside the contributory regime, to reduce the level of extreme poverty in the archipelago.

The proposal, delivered by the government to parliament on October 3, is valued at around CVE 77 billion (US$687).

The archipelago has been facing a deep economic and financial crisis, due to the sharp drop in tourism demand – a sector that guarantees 25% of the archipelago’s gross domestic product (GDP) – since March 2020, due to the covid-19 pandemic.

With information from Lusa