The report, titled Unpacking the Inter-Island Connectivity-Growth Nexus, highlights the country’s economic resilience while warning that structural challenges continue to limit broader and more inclusive growth.
According to the World Bank, tourism remained the primary driver of economic expansion during 2025, helping to boost household spending, government revenues and employment. Strong fiscal management also contributed to the country’s first budget surplus since 2007.
World Bank Group Resident Representative for Cabo Verde Indira Campos said the country’s recent performance demonstrates the benefits of combining sound macroeconomic policies with private-sector growth. “Cabo Verde’s 2025 results show what is possible when macroeconomic discipline is matched by private-sector dynamism,” said Campos.
Despite the positive outlook, the report warns that Cabo Verde remains highly dependent on tourism and vulnerable to external shocks. Additional risks include the financial exposure associated with state-owned enterprises and weaknesses in transport links between islands.
Inflation rose to 2.3% during 2025, while the poverty rate declined from 53.8% to 51.2%. Labour market conditions also improved, with unemployment falling to 6.2%, although youth unemployment remains above 15%.
The country’s external position strengthened further, with international reserves reaching a record $1.1 billion, equivalent to 7.1 months of prospective imports.
Tax revenue increased by 16.8% year-on-year, helping to support fiscal consolidation. Public debt also continued its downward trend, falling to 100.7% of GDP in 2025.
However, the World Bank noted that debt servicing remains a significant burden. Debt service currently absorbs 34.2% of government revenue, a figure that would rise to 46.3% if obligations linked to state-owned enterprises were included.
Economic growth is expected to moderate to 4.8% in 2026 before stabilising at around 5.1% over the medium term. The World Bank cited global uncertainty and the economic effects of the conflict in the Middle East as factors expected to weigh on growth.
A key focus of the report is the challenge of inter-island connectivity. The World Bank identified unreliable and expensive air and maritime transport as major obstacles to economic integration and diversification.
Poor transport links increase business costs, limit domestic trade and concentrate economic activity in the tourism centres of Sal and Boa Vista. The report says these constraints reduce opportunities for women, young people and communities located on less-connected islands.
To address these challenges, the World Bank recommends modernising transport concession frameworks, strengthening regulation and increasing private-sector participation in air and maritime services.
According to the report, improving inter-island connectivity would lower costs, strengthen links between tourism, agriculture, fisheries and logistics, and create broader employment opportunities across the archipelago.
The World Bank also called for stronger governance of state-owned enterprises to reduce fiscal risks, improve service delivery and create a more attractive environment for private investment and sustainable job creation.
–WorldBank/ChannelAfrica–
