PRAIA, JULY 14, 2026 - Cabo Verde's economy maintained strong momentum in 2025, and real GDP expanded by 6.3%, driven by record tourism arrivals, stronger private consumption, and improved fiscal performance, according to the latest country Economic Update 2026, released today by the World Bank. Despite these gains, the report warns that key vulnerabilities remain, including continued dependence on tourism, fiscal risks linked to state-owned enterprises (SOEs), and weak inter-island connectivity that constrains private sector growth and economic diversification.
The report, titled Unpacking the Inter-Island Connectivity-Growth Nexus, examines Cabo Verde's macroeconomic outlook, progress on poverty reduction, and the reforms needed to strengthen resilience and broaden the base of growth. It identifies inter-island connectivity as a critical constraint on productivity, market integration, and inclusive development across the archipelago.
"Cabo Verde's 2025 results show what is possible when macroeconomic discipline is matched by private-sector dynamism. The next step is to turn today's tourism-led rebound into broader, more resilient growth by fixing the fundamentals that connect the archipelago - reliable, affordable inter-island transport. Improving connectivity will lower costs, integrate markets, and ensure that more Cabo Verdeans across all islands can benefit from growth", said Indira Campos, World Bank Group Resident Representative for Cabo Verde.
The report notes that inflation increased to 2.3% in 2025, while poverty declined from 53.8% to 51.2%. The labor market showed resilience as unemployment fell to 6.2%, though youth unemployment remains above 15%. International reserves reached a record EUR 975 million, equivalent to 7.1 months of prospective imports, while tax revenues rose by 16.8% year-on-year, contributing to the country's first fiscal surplus since 2007.
Public debt fell to 100.7% of GDP in 2025, continuing its downward trajectory, though debt service continues to absorb 34.2% of government revenues - a figure that would rise to 46.3% if SOE obligations were included. Growth is projected to moderate to 4.8% in 2026, reflecting spillovers from the conflict in the Middle East and emerging headwinds from global instability, before stabilizing at around 5.1% over the medium term.
The report highlights unreliable and costly domestic air and maritime transport as a major obstacle to economic integration and tourism diversification. Weak connectivity raises costs for businesses and households, limits domestic value chains, and concentrates economic activity in Sal and Boa Vista. These constraints also limit the economy's ability to translate growth into broader job opportunities, particularly for young people, women, and workers in islands that remain weakly connected to tourism and other growth sectors.
To address these constraints, the report recommends strengthening regulation, modernizing transport concession frameworks, and expanding opportunities for private sector participation in air and maritime services. These reforms would improve the reliability, affordability and predictability of inter-island transport, reducing costs for firms and households while enabling businesses to reach new markets across the archipelago. By strengthening links between tourism, agriculture, fisheries, logistics, and local services, better connectivity can help unlock more diversified private sector activity and support the creation of more, better, and more inclusive jobs, particularly for women and young people outside the main tourism centers.
The report also highlights the importance of stronger SOE governance to reduce fiscal risks, improve service delivery and create an enabling environment for private investment and sustainable job creation.
