CAPE VERDE

RISK RATING
Elevated
Default High Risk Score 5.00
Normal Average 2.08
Weighted Average 1.72
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

Cape Verde is undergoing its worst economic crisis in 45 years. Poor natural resources and limited economic avenues have left the country heavily dependent on tourism which has suffered a major shock during the pandemic. While Cape Verde is renowned for its stability, such shocks threaten to expose economic and political vulnerabilities in the country ahead of the 2021 elections. International institutions are nevertheless forecasting a significant rebound in the local economy. Moreover, despite the potential for anti-government sentiment to rise in the lead up to elections, the ruling MpD is nevertheless expected to weather the storm, as it has enjoyed significant support since coming into power. An expected rebound in the economy and a focus on the country’s long-term sustainable development plans with strong bilateral and multilateral support are likely to mitigate the risk outlook over the medium to long term.

  • President Jorge Carlos Fonseca of the governing MpD has generally performed well since 2016. Cape Verde was upgraded to a middle-income country status and through the structural reforms outlined in the Strategic Plan for Sustainable Development (2017-2021), the government has sought to foster more sustainable and inclusive growth. Key focus areas have included improving access to basic public services, reducing taxes for small and medium-sized businesses, cutting expenditure on costly infrastructure projects and following through on the privatisation of 23 public and state-owned enterprises. However, the MpD has come under heavy criticism for its handling of the crisis and economic hardships, which raises the probability of transition to the PAICV party.
  • Drug trafficking has become a major concern, since Cape Verde is situated along a line of latitude nicknamed ‚ÄúHighway 10‚ÄĚ which provides the shortest trafficking route between Latin America and Africa. For cartels using ‚ÄúHighway 10‚ÄĚ, Cape Verde is an ideal stop for refuelling their ships, warehousing their products, and shipping them for their final destination, Europe. Criminal networks are known to threaten officials, for example, whilst gangs that operate across the archipelago have been involved in violent crime. Beyond being involved in violent crime, such gangs are known to launder money through numerous entities, from NGOs to real estate businesses, raising the risk of doing business in the country as well. Such a culture of fear threatens to dampen Cape Verde‚Äôs image as an ideal tourist destination after COVID-19.
  • The worst economic crisis in 45 years is driven by a loss in tourism ‚Äď tourism accounted for over 20 percent of GDP before the pandemic. The main concern rests on debt sustainability as the public debt is set to soar to 136 percent of GDP. To assist Cape Verde, the IMF has approved financial assistance and Portugal ‚Äď Cape Verde‚Äôs largest creditor ‚Äď is restructuring some of the bilateral debt of around EUR 600 million into strategic investments. An economic recovery depends on the restoration of tourism numbers, diaspora remittances, manufacturing industry stimulus, and increased public infrastructure spending. Longer-term growth constraints centre on labour-market concerns and stabilising the public-sector investment drive, owing to rising public-sector debt obligations.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
1.5
Expropriation, Nationalisation, Confiscation & Deprivation
1.0
Contract Frustration & Breach
1.5
Taxation
1.5
Bribery & Corruption
1.5
Regulatory Burden
1.8
Strikes, Riots & Civil Commotion
1.8
Security
1.2
Sovereign Default
4.0
Economic Volatiliy
5.0

Risk Rating Scale (small)

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