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Select Economic and Financial Indicators2014201520162017e2018f
Real GDP (% change)0.61.03.84.04.1
GDP (USD bn)1.91.61.61.71.9
Inflation (average)-0.20.1-1.40.91.5
Fiscal Balance (% GDP)-7.6-4.6-3.5-4.0-4.4
Broad Money (% change, end period)7.46.38.46.87.5
Population (mn)0.50.50.50.50.6
Exports (USD bn)0.90.70.70.80.8
Imports (USD bn)1.20.91.01.11.2
Current Account Balance (% GDP)-9.1-5.0-3.7-6.1-6.2
FX Reserves (USD bn, end period)0.70.50.60.60.7
Exchange Rate (average)82.7999.4299.4398.3791.13
Sources: IMF, World Bank, UN, Bloomberg, Ecobank Research

Economic outlook

Economic outlook

Real GDP: The short-term outlook now appears stronger than previous years owing to an improving outlook in the country’s key exporter of tourists, the eurozone. As a result, growth is likely to continue on its modest trajectory in 2018, averaging 4.1% during the year. Economic activity will also be supported by developmental projects under the public investment programme (PIP), increased remittances which should support consumption, fish production, as well as tourism, which should benefit from improving prospects in the EU.

Inflation: the reflationary trend seen in 2017 is likely to continue in 2018 reflecting modest growth in domestic activity and an increase in energy prices (albeit remaining below historical highs). However, inflation is likely to remain benign (below 3.0%) under the assumption of favourable weather conditions, which should support food prices and the currency peg to the EUR, which helps to anchor inflation (similar to UEMOA-member countries).

Fiscal balance: The fiscal account will continue to pose deficits owing to revenue challenges, the capital outlays under the PIP and ongoing demand for government services. However, plans in recent years to strengthen expenditure controls on current spending and adopt a less ambitious PIP would help to contain fiscal pressures in 2018; this is in addition to ongoing reforms aimed at improving the performance of state-owned enterprises.

Current account: Pressure on the current account is likely to increase amid the recent rebound in oil prices and expectation of further USD strengthening; these factors will increase import costs, in addition to capital imports geared towards the PIP. However, as the latter phases out in the medium term, we expect import costs to temper and public debt levels (currently above 100% of GDP) to decline as capital financing needs reduce. Despite our prognosis of continued large deficit in 2018, we believe that currency risk will be limited by the exchange rate peg to the EUR and ongoing FDI inflows, tourism receipts and remittances.

Risks

The debt stock relative to the size of the economy has risen more than planned (standing in the high risk category, above 100% of GDP) due to lower growth and EUR depreciation in recent years (which is USD positive), indicating an increase in debt risks. Further USD strengthening will add more pressure on debt levels, and this alongside an unexpected rise in oil and global food prices would derail the fragile fiscal and external positions increasing financing risk. Meanwhile, ongoing economic challenges in the eurozone (albeit improving over recent years) will continue to undermine Cape Verde’s growth potential.

FX, FI and Commodity Information

FX, FI and Commodity Information

Exchange Rate Structure

RegimeFixed
TargetCVE110.265 to EUR1
Type of interventionVia Banco De Cabo Verde
Convertible currency?Yes
Market participantsn/a
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FX

FX ProductsSpotForwardsNon-deliverable ForwardsOptionsSwaps
On offerYesNoNoNoNo
Daily trading volume (USD mn)n/an/a
Average trade size (USD mn)n/a
Average spreadn/a
Trading hoursLimited
Settlement cycleT+2
FX Market StructureThe BCV maintains an exchange system free of restrictions, except for those maintained for security reasons.
Non-resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowNo restrictionsn/a
Financial flow
Resident FX RegulationsSpotForwardsNon-deliverable ForwardsOptionsSwaps
Trade and FDI flowNo restrictionsn/a
Financial flow
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FI

Primary MarketTreasury billsTreasury notesTreasury bondsCentral Bank billsOMOs
IssuerGovernmentn/aGovernmentCentral Bankn/a
End useGovernment & infrastructure financingGovernment & infrastructure financingLiquidity management
Maturity structure90 – 180 days10-yrs14 – 90 days
CouponFixedFixedFixed
Coupon paymentsUpfrontSemi-annualOn maturity
Secondary Market 
Daily trading volumeLimited tradingn/a
Average trade sizeLimited trading
Settlement cyclen/a
Ecobank local affiliate contact details:
Ecobank Cabo Verde, Avenida Cidade de Lisboa, Praia, Santiago
Tel: +238 260 36 90
Source: Bloomberg, IMF, BCEAO, and Ecobank Research

FI primary market information

FI primary market information

Cabo Verde Debt2014201520162017e2018f
Government debt (% GDP)115.9127.9133.8134.7133.0
Sub-Sahara average44.351.554.754.854.8
External debt (official creditors, % GDP)82.696.697.7102.7100.8
Sub-Sahara average25.429.531.333.033.4
External public debt stock (USD bn)1.51.51.61.71.7
Share of total sub-Sahara debt (%)0.60.60.60.70.7
Source: IMF; Ecobank Research

Commodity and trade information

Commodity and trade information

Hydrocarbon & mineral production

Cape Verde has few mineral resources and its only significant mineral output is pozzolana cement, made from the volcanic rock prevalent in the archipelago, all of which is used for local consumption. Cape Verde also produces 1,000 tonnes of salt per year, mostly for domestic consumption.

Cape Verde has no known oil or gas reserves and there has been no serious effort to explore for hydrocarbons in the archipelago’s vast offshore area, although active exploration continues in the neighbouring Senegal Basin. Cape Verde consumed an estimated 326,000 tonnes of petroleum products in 2016, a 2.5% increase on the previous year.

Soft commodity production

Given the archipelago’s limited land and water resources, Cape Verde does not produce agricultural commodities for export and the country remains heavily dependent on food imports to meet domestic needs. The country’s only significant commodity production is fish (around 35,000 tonnes per year) and meat, of which over 80% is exported to Spain.

Trade flows

Imports

Cape Verde’s imports totalled US$550mn in 2016, 9.3% lower than the previous year. Given the country’s lack of refining capacity and erratic weather, the country is dependent on imports of petroleum products, worth US$54mn in 2016. The country is also dependent on imports of food (worth US$100mn in 2016), which can rise sharply during periodic droughts, as well as imports of vehicles, machinery and electronics (US$109mn), and of cement, plastics and iron & steel (totalling US$63mn).

Exports

Cape Verde’s exports totalled US$62.7mn in 2016, 71% lower than the previous year. This slump was largely due to the collapse in petroleum re-exports, which fell from an estimated US$79.4mn in 2015 to zero in 2016; this reflects the sharp reduction in ships and aircraft using the archipelago as a refuelling hub (bunkering). Exports of fish (fresh, frozen & processed) also fell in 2016, to an estimated US$51mn, although re-exports of footwear & apparel rose by 8.1% to US$10mn.

  • Flag
  • Population
    553,335
  • Area
    4,033 km2
  • Capital
    Praia
  • Largest city
    Praia
  • Official language
    Portuguese
  • Major languages
    Cape Verdean Creole
  • Currency
    Cape Verdean Escudo (CVE)

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