The cycle of growth of the economy of Cabo Verde in recent years is expected to be reversed by the unexpected and as yet uncertain impacts of the COVID-19 pandemic, wrote the Bank of Cabo Verde in its Monetary Policy Report, published on Monday in Praia.
The document recalled that the economy of the archipelago saw Gross Domestic Product (GDP) grow 5.7% in volume in 2019 and the rate of inflation fell from 1.3% to 1.1%, according to figures released by the National Statistics Institute (INE).
“External accounts had an unprecedented performance in the recent history of the country, with the current account deficit dropping to 0.2% of GDP and net international reserves increasing by 133 million euros to finance 6.9 months of imports of goods and services,” the report said.
The report added that the public account deficit was reduced from 2.7% to 1.8% of GDP, according to the Ministry of Finance, as a result of the exceptional increase in donations and the contraction of public investment.
“The increase in net external assets, of some 25%, and the growth of credit to the economy, by 3.9%, meanwhile led to the expansion of the monetary mass,” it said.
The report added that the backdrop of uncertainty about the external environment and the health and internal macroeconomic context, current forecasts point to the economy contracting by 4.0% in a moderate scenario and 6.1% in the most adverse scenario.
“Inflation, in turn, may reduce to 0.9% in the first scenario, or increase to 1.2% in the second scenario,” added the central bank of Cabo Verde in its monetary policy report.