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- GDP (PPP):
- $2.2 billion
- 4.3% growth
- 4.9% 5-year compound annual growth
- $4,133 per capita
- Inflation (CPI):
- FDI Inflow:
Cape Verde’s economic freedom score is 66.1, making its economy the 60th freest in the 2014 Index. Its overall score is 2.4 points better than last year, with substantial gains in labor freedom, business freedom, investment freedom, and the management of government spending. Cape Verde is ranked 3rd out of 46 countries in the Sub-Saharan Africa region, and its overall score is higher than the global and regional averages.
Over the 20-year history of the Index, Cape Verde has advanced its economic freedom score by 16.4 points, a top 20 improvement. The overall increase has been broad-based in seven of the 10 economic freedoms including trade freedom, financial freedom, the management of government spending, and freedom from corruption, scores for which have improved approximately 25 points or more.
Achieving its highest economic freedom score ever in the 2014 Index, Cape Verde has advanced well into the ranks of the “moderately free.” While moving toward higher levels of economic freedom, it has made considerable progress in income growth and poverty reduction. The government continues to support policies that promote free trade and open markets.
Cape Verde is a stable, multi-party parliamentary democracy. Jose Maria Neves of the African Party for the Independence of Cape Verde became prime minister after the February 2011 legislative elections, and opposition leader Jorge Carlos Fonseca won the presidency later that year. Cape Verde has few natural resources and is subject to frequent droughts and serious water shortages. Services dominate the economy, and about 82 percent of food is imported. Cape Verde has close economic and political ties to the European Union, which has granted it special partnership status. Its currency is pegged to the euro, and it joined the World Trade Organization in 2008. Remittances account for over 20 percent of GDP. Current economic reforms are aimed at lowering regulatory hurdles for business and driving down high unemployment.
Private property is reasonably well protected. Political and economic governance is generally regarded as among the region’s best. The government is creating a reliable and easily accessible land registration system that is expected to strengthen the investment climate. The constitutional provision for an independent judiciary is generally respected, but the judicial system is inefficient, and the case backlog causes significant delays.
The top individual income tax rate is 35 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT). The overall tax burden has risen to 20.2 percent of GDP, and government expenditures amount to 32.3 percent of gross domestic output. Public debt continues to climb and has reached over 100 percent of GDP. The government’s most recent budget increased the VAT tax on the tourism sector.
The regulatory framework has been modernized. The business start-up process is now more straightforward, with lower minimum capital requirements, but licensing requirements remain time-consuming and costly. Despite reform efforts, the rigidity of the labor market continues to impose a high cost on businesses. The market determines most prices, but the government subsidizes electricity and water as well as an unprofitable state-owned airline.
Cape Verde’s average tariff rate is 10.2 percent. It is easy to import goods compared to other countries in the region. Several state-owned companies have been privatized with participation from foreign investors. The financial system is dominated by banking, and banking assets constitute over 90 percent of financial sector assets. The share of non-bank financial institutions is negligible except for the state-owned pension fund.