Cabo-Verde Economic Update : Unpacking the Inter-Island Connectivity-Growth Nexus

World Bank

Published

13 Jul 2026

Coverage

Westafricai

Cabo Verde’s economy is estimated to have grown by 6.3 percent in 2025, driven by strong tourism demand from European markets, expanded flight capacity, and robust performance in the services sector. Growth was supported by service exports, investment, and private consumption, while inflation rose moderately to 2.3 percent. Improved economic activity and remittance inflows contributed to a reduction in poverty and lower unemployment, although youth unemployment and labor underutilization remain persistent challenges. The country’s external position strengthened through higher exports, stable remittances, increased foreign direct investment, and record international reserves, while strong revenue collection generated the first fiscal surplus since 2007 and supported a decline in public debt. Despite these gains, fiscal risks persist due to high debt-servicing costs and liabilities associated with state-owned enterprises (SOEs). Looking ahead, growth is projected to moderate as tourism normalizes and global uncertainties, including conflict in the Middle East, affect demand, inflation, and external balances. A major structural constraint to long-term growth is weak inter-island connectivity. Inefficiencies in air and maritime transport limit labor mobility, tourism diversification, domestic market integration, and private sector development. The report argues that improving connectivity through stronger regulation, transparent governance, performance-based contracting, and greater private sector participation would enhance service reliability, reduce fiscal risks, strengthen domestic value chains, promote spatial inclusion, and transform connectivity from a structural bottleneck into a key driver of sustainable and inclusive economic growth.