About Us Contact Us Site Map

Economy

Trade deficit

The economy of Cape Verde is to some extent hindered by the islands’ lack of natural resources and limited supply of fresh water or rain, along with periods of drought. The nation has a high trade deficit, and around 82% of the nation’s food must be imported. Over 70% of Cape Verde’s GDP comes from transport, commerce and public services industries. There is a significant level of agricultural production in just four of the ten main islands, and fishing and agriculture only account for 10% of the nation’s GDP, despite the majority of the population being located in rural areas. Cape Verde’s estimated GDP real growth rate in 2005 was 5.5%.

High remittances

Money which is sent to the country from Cape Verdeans who no longer live on the islands accounts for more than 20% of the GDP. There are more Cape Verdeans living in other countries than remain on the islands, and the level of their remittances, along with foreign aid, significantly helps to finance the country. Indeed, the future of Cape Verde’s economy is largely dependent on continuing aid flows and remittances, alongside development of the growing tourist industry. The unemployment rate in Cape Verde has dropped to 18.3%, recorded earlier this year by the National Statistics Institute (INE).

Economic reforms

A combination of considerable investment over recent years, both from public and private sources, has seen Cape Verde upgraded from a ‘low-income’ status to ‘middle-income’. The government is understandably keen to encourage this investment, and the future of the nation’s economy is reliant on ongoing foreign investment. With this in mind, the government is offering non-resident investors five tax-free years followed by ten years with a 50% reduction on corporate tax (at 30%), as well as other incentives such as making building materials exempt from import duties and granting residency to private individuals who invest over €35,000 or employ more than 13 nationals. Pedro de Verona Rodrigues Pires, Cape Verde’s president, supports these reforms, and his government also prioritises the sale of state-owned plots to foreign developers.

The Foreign Direct Investment (FDI) net inflows during 2004 amounted to $20 million. FDI growth in 2005 increased by 31.4%.

Links with Portugal

Cape Verde’s relationship with Portugal extends to its economy, and the Cape Verdean currency was first linked to the Portuguese escudo, and later to the euro when Portugal joined the euro zone in 1999.

Related items

Documents and Reports

	Cape Verde property investment report (325Kb)
Documents and Reports

Other related pages

Bookmark with:	What are these?
DeliciousDiggredditFacebookStumbleUpon