Historic 17.7% growth in Cape Verde cancels an upwardly revised recession.

The Cape Verdean economy has fully recovered from the fall caused by the COVID-19 pandemic in 2020, which was even revised upwards by INE, with gross domestic product (GDP) growing by 17.7% last year, driven by tourism.

Cape Verde’s economic performance in 2022, added to GDP growth of 6.8% in 2021, has reversed the recession, according to Lusa’s National Institute of Statistics (INE) Quarterly Reports this Monday. 19.3% in 2020. This decline was also revised upwards in the INE document from the previously announced 14.8%.

On average, Cape Verde’s economy grew by 3.2% between 2019 and 2022, despite a historic 2020 recession, according to INE’s as-yet-preliminary data.

In 2022, the accommodation and catering sector grew sharply by almost 265% compared to the previous year, which then fell by -21.4%, the same as in 2020, in this case -61%. In 2019, before the impact of the COVID-19 pandemic on tourism, the sector grew by 6.5% compared to 2018, according to INE.

Tourism accounts for about 25% of GDP and employment in Cape Verde.

Investment fell 31.8% in 2022, while private consumption rose 28.3% and government consumption fell 7% compared to 2021.

The INE data even surpasses the latest growth forecast made by the government of Cape Verde, which was even revised down to 4% throughout 2022 due to the consequences of the war in Ukraine, which at the end of January indicated growth to 15%, despite inflation crisis of recent months.

“In difficult conditions of crises, the economy will grow in 2022 by 12-15% compared to pre-war periods in Ukraine,” Prime Minister Ulisses Correia e Silva said on January 27 in parliament.

The head of government recalled that Cape Verde moved from inflation of 1.9% in 2021 to 7.9% in 2022, due to rising prices in Portugal and the Eurozone, the main economic ties of the archipelago.

“We have implemented financial, fiscal and regulatory measures to mitigate the effects of imported inflation, which has hit fuel and electricity prices, as well as the prices of staples, grains. In Cape Verde, inflation has driven up production costs. The energy cost was 2.1 million PTE. [2.100 milhões de escudos, 19 milhões de euros]. Huge external shock exacerbated by the devaluation of the euro against the dollar in 2022,” he said.

“Thanks to the measures taken by the Government, only 20% of this shock was transmitted to consumers. The state directly and indirectly absorbed 80% of the shock,” the Prime Minister stressed to the deputies.

He added that if these measures had not been implemented by the government, prices for butane, gasoline, diesel and electricity “would have risen much higher than recorded”, as was the case for butane gas, which has not risen above what was in force in February 2022, before the start of the war.

“Without the measures, the tariff for electricity in the second tier, which applies to most household consumers, would be 67% higher than the pre-war value. It has increased by 15%. Without the measures, the social tariff for electricity would have increased by 157%. It has not increased,” the head of government insisted at the time.