Inflation in Cape Verde above 12% without measures to be taken in the face of war

Cape Verde’s deputy prime minister, Olavo Correia, said today in parliament that inflation in the country could reach 12% if no measures were taken to deal with the effects of the war in Ukraine.

“In terms of inflation, we made a scenario, and if the measures had not been taken, we would certainly have inflation above 12% in 2022”, predicted the also Minister of Finance, when answering questions from parliamentarians, in the first session of the year in the Cape Verdean parliament, saying that the value could increase depending on the evolution of the external situation.

According to Olavo Correia, registering this value would mean a reduction in the income of families and companies, a deterioration in the conditions of competitiveness and could cause social chaos.

On June 20, the Cape Verdean Prime Minister, Ulisses Correia e Silva, declared a social and economic emergency in the country due to the impacts of the war in Ukraine, announcing mitigation measures, with a total cost of more than €80 million.

In September, the executive had already mobilized more than half of that amount from international partners to implement the measures adopted in the economy, energy and agri-food sectors.

Cape Verde is recovering from a deep economic and financial crisis, resulting from the sharp drop in tourist demand – a sector that guarantees 25% of the archipelago’s Gross Domestic Product (GDP) – since March 2020, due to the covid-19 pandemic.

In 2020, it experienced a historic economic recession, equivalent to 14.8% of GDP, followed by growth of 7% in 2021 driven by the recovery in tourist demand.

For 2022, due to the economic consequences of the war in Ukraine, namely the rise in prices, the Government, supported by the Movement for Democracy (MpD), lowered in June the growth forecast from 6% to 4%, which, however, returned to be reviewed, for more than 8% and already last week for 10 to 15% and foresees a record inflation of 8% for this year.

Cape Verde’s 2023 State Budget, approved by parliament in November and enacted by the President of the Republic, José Maria Neves, is evaluated at €712 million, and forecasts an economic growth of 4.8% of GDP and inflation below 4%.

With information from MSN