- Economic growth is picking up in Cape Verde, which is currently becoming re-classified as a middle-income country. The new growth is mainly due to higher foreign investments in Cape Verde's infrastructure and the tourism sector, which is seen as the prime hope for further development.
According to the latest assessment of the Cape Verdean economy by the International Monetary Fund (IMF), the country's economic and policy performance "continues to be sound." An IMF mission that visited Praia last week concluded that the archipelago could expect stronger economic growth this year.
Cape Verde's real GDP grew by 4.5 percent last year, according to the latest estimations by the IMF and authorities in Praia. According to the Fund's mission, economic growth was "projected to pick up to around 6 percent in 2005, with inflation remaining low." This is far more than population growth in Cape Verde, estimated at an annual 2.1 percent.
The IMF mission was also optimistic on Cape Verde's continued economic performance. The medium-term economic growth outlook was set at 6 to 7 percent by the government - a calculation supported by the mission. Economic performance in 2004 and 2004 has so far been in line with the Praia government's medium-term plans, launched in April 2002. These plans foresaw a slow recovery from the modest growth rates between 2001-03.
According to the IMF, this favourable outlook "is supported by strong public and private investment, directed largely toward infrastructure development and the tourism sector, and backed by higher external support." The tourism sector some years ago was declared the industry with a largest growth potential in Cape Verde, a sunny and naturally beautiful island state.
During the last decade, Cape Verde has also enjoyed an increasingly positive image among foreign investors, given its stable economic and political climate. Cape Verde's "high standards of governance," which were also praised by the IMF mission, further has increased investors' confidence.
The strong economic performance over years has led to the new classification of Cape Verde as middle-income country by UN standards. This in turn will give the archipelago less possibilities regarding classical development aid from donor countries and financial institutions such as the IMF and the World Bank. The Cape Verdean government therefore currently is asking donor countries and institutions for a smooth transition.
This new classification was discussed in parliament in Praia earlier this week. Prime Minister José Maria Neves emphasised that the middle-income status also was a resource to the nation, being "proof of the external credibility achieved by Cape Verde." Mr Neves added that further foreign investments would be easier to achieve given "the prestige that the country now enjoys."
Opposition leader Agostinho Lopes however warned that foreign investments were currently declining due to government policies. Cape Verde was lacking "visions and options for the future," Mr Lopes said, adding the government was becoming too dependent on aid from donor countries and institutions.
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