Cape Verde in 2025: Tourism Boom and Economic Diversification Signal Bright Future for Island Nation
Economic Renaissance in the Atlantic
Cape Verde’s economy has demonstrated remarkable resilience, with real GDP growth reaching 7.3% in 2024, driven by surging tourist arrivals and the first positive agricultural season in years. The country has achieved historically low inflation at 1%, which has supported real income growth and helped reduce poverty below pre-pandemic levels.
Tourism Sector Leading the Way
The services sector, particularly tourism, has emerged as the dominant growth driver, contributing over 70% of total expansion. Tourist arrivals have shown impressive growth, reaching 1.18 million visitors, with a notable shift toward non-traditional accommodation options. Looking ahead, the archipelago is projected to welcome approximately 1.08 million tourists by 2028, with its appeal growing due to its unique cultural heritage, pristine beaches, and favorable climate.
Economic Diversification and Development
The archipelago, known for its stable and predictable business climate in Africa, continues to implement its strategic plan for sustainable development. This plan focuses on strengthening economic diversification, accelerating ecological transition, and encouraging digital sector development. A significant step in this direction is the Digital Cabo Verde Project, supported by a $20 million IDA investment, which aims to enhance the country’s digital competitiveness and improve public services through better legal frameworks, connectivity, digital skills, and entrepreneurship.
Challenges and Future Outlook
The country faces several downside risks, including potential commodity price spikes from geopolitical tensions, inflationary pressures, weaker tourism demand, and the pace of state-owned enterprise reforms. Climate-related shocks remain a significant concern given the country’s high vulnerability. However, GDP growth is projected to stabilize at 4.8% in 2024, increasing to 5.1% in 2025 as the tourism sector consolidates at pre-pandemic levels, with average inflation projected at 2.0% in 2024, further decreasing to 1.9% in 2025.
While the recovery reflects Cape Verde’s sustained commitment to macroeconomic stability, key priorities remain: diversifying the economy beyond tourism, reducing fiscal vulnerabilities from the State-Owned Enterprise sector, and investing in inclusive human capital development.
