Cabo Verde Eyes Broader Growth as World Bank Calls for Better Connectivity

Looking ahead, the World Bank expects economic growth to ease to 4.8% in 2026 as global uncertainty and tensions in the Middle East affect international markets.

Cabo Verde's economy delivered another year of solid growth in 2025, with real gross domestic product (GDP) rising by 6.3%, supported by record-breaking tourist arrivals, stronger household spending, and healthier public finances, according to the World Bank's latest Cabo Verde Economic Update 2026.

The report says the country's tourism-led recovery has strengthened economic activity and helped improve living standards. Inflation remained relatively contained at 2.3%, while the national poverty rate fell from 53.8% to 51.2%. The labour market also improved, with unemployment declining to 6.2%, although youth unemployment continues to exceed 15%, showing that many young people are still struggling to find stable work.

Government finances also showed encouraging progress. Tax revenues increased by 16.8% compared with the previous year, helping Cabo Verde record its first fiscal surplus since 2007. International reserves climbed to a record €975 million, providing enough foreign exchange to cover 7.1 months of projected imports, giving the country a stronger financial cushion against external shocks.

Transport challenges continue to limit economic opportunities across islands

Despite these achievements, the World Bank says Cabo Verde still faces structural challenges that could slow future progress if left unaddressed. The report, titled Unpacking the Inter-Island Connectivity-Growth Nexus, identifies weak transport links between the country's islands as one of the biggest barriers to long-term economic development.

Reliable and affordable domestic air and maritime transport remains limited, making it more expensive for businesses to move goods and for people to travel between islands. These challenges restrict market access, reduce productivity, and make it harder for industries outside tourism to expand.

The report also notes that economic activity remains heavily concentrated on the islands of Sal and Boa Vista, where tourism is strongest. This leaves other islands with fewer opportunities to benefit from economic growth and limits job creation for women, young people, and workers living outside the country's main tourism hubs. Indira Campos, the World Bank Group's Resident Representative for Cabo Verde, said the country's recent performance demonstrates the benefits of sound economic management combined with private sector growth. She said the next phase of development depends on improving transport links that connect the islands, reduce business costs, integrate markets, and allow more communities to share in the country's economic success.

Reforms could strengthen resilience and create more inclusive growth

Looking ahead, the World Bank expects economic growth to ease to 4.8% in 2026 as global uncertainty and tensions in the Middle East affect international markets. Growth is then projected to stabilise at around 5.1% over the medium term. Public debt also continued to decline, reaching 100.7% of GDP in 2025. Even so, debt servicing still consumes 34.2% of government revenues, and that figure would rise to 46.3% if the obligations of state-owned enterprises (SOEs) were included, highlighting ongoing fiscal risks.

The report recommends modernising transport concession systems, strengthening regulation, and encouraging greater private sector participation in domestic air and maritime services. Better transport connections would support stronger links between tourism, agriculture, fisheries, logistics, and local businesses, helping diversify the economy while creating more jobs across the archipelago.

The World Bank also calls for stronger governance of state-owned enterprises to reduce fiscal pressures, improve public services, encourage private investment, and build a more resilient economy that benefits communities across all of Cabo Verde's islands.