Cabo Verde's economy grows 6.3% as World Bank urges transport reforms

Tourism remained the biggest driver of the economy as record numbers of visitors from Europe, combined with increased flight capacity, boosted activity across the services sector.

Cabo Verde's economy delivered another year of strong growth in 2025, with real GDP expanding by 6.3%, driven by record tourism arrivals, higher private spending and improved fiscal performance. The latest Cabo Verde Economic Update 2026 from the World Bank says the country has made significant economic progress but warns that long-term growth will depend on tackling structural weaknesses, particularly poor transport links between its islands.

Tourism remained the biggest driver of the economy as record numbers of visitors from Europe, combined with increased flight capacity, boosted activity across the services sector. The industry accounted for 4.1 percentage points of overall economic growth, while stronger household spending contributed another 2 percentage points.

The positive economic performance also translated into better social outcomes. Unemployment fell to 6.2%, while the national poverty rate declined from 53.8% in 2024 to an estimated 51.2% in 2025. The World Bank notes that the next challenge is creating more stable, higher-quality jobs that benefit people across all islands rather than concentrating opportunities in a few locations.

Strong finances mask deeper structural challenges

The report highlights several encouraging financial indicators. Cabo Verde recorded a current account surplus of 3.6% of GDP, supported by strong tourism earnings and steady remittances from citizens living abroad. International reserves reached a record €975 million, providing enough foreign currency to cover 7.1 months of imports.

The country's fiscal position also improved, with a budget surplus of 1% of GDP, the first surplus since 2007. Strong tax revenues and a one-off airport concession payment helped strengthen public finances, while public debt continued its downward trend, falling to 100.7% of GDP.

Despite these gains, the World Bank warns that significant risks remain. Debt servicing still consumes 34.2% of government revenues, and that figure would rise to 46.3% if obligations linked to state-owned enterprises were included. The national airline continues to pose one of the country's largest fiscal risks because of costly government guarantees and financial support.

The report also notes that Cabo Verde's economy remains heavily dependent on tourism, with 93% of visitors arriving from Europe. Any slowdown in European economies or disruption to international travel could quickly affect growth.

Better island connections seen as key to future growth

According to the World Bank, one of Cabo Verde's biggest barriers to broader economic development is weak inter-island connectivity. Domestic air travel remains expensive and unreliable, while maritime transport suffers from ageing vessels, irregular ferry services and limited competition. These transport challenges increase costs for businesses, reduce access to markets and limit opportunities for workers, particularly on islands that receive fewer tourists.

The report argues that better transport links would allow tourism to spread beyond Sal and Boa Vista, while strengthening industries such as fisheries, agriculture and local services. Improved connectivity would also make it easier for businesses to invest across the archipelago and help workers access employment opportunities on different islands.

Looking ahead, the World Bank expects economic growth to slow to 4.8% in 2026, with inflation rising to 3.2% as higher global energy prices increase import costs. The current account is projected to return to a modest deficit, though foreign investment and remittances are expected to keep international reserves at comfortable levels.

To sustain growth over the long term, the report recommends expanding tourism across more islands, strengthening domestic industries, reforming air and maritime transport through performance-based contracts, increasing transparency in transport subsidies and creating greater opportunities for private sector participation.