Hong Kong, China, May 13, 2025 (Lusa) - The financial rating agency Fitch Ratings on Tuesday maintained Cabo Verde's rating at B, with a stable outlook. It forecasts economic growth of 5.5% this year and next, and a debt reduction.
"Cabo Verde's rating reflects strong governance indicators relative to its peers, a robust economic growth outlook supported by a growing tourism sector, sustained fiscal consolidation and adequate levels of international reserves," according to the note accompanying today's decision.
However, Fitch Ratings analysts believe these positive factors are offset by "high, albeit declining, public debt and external borrowing, significant financial vulnerabilities and persistent external vulnerabilities".
The rating agency acknowledged that the approaching elections may slow the pace of reforms in public companies, but still forecasts growth of 7.3% in 2024, slowing to an average of 5.5% this year and next, supported mainly by the tourism sector, the economy's main driver.
Inflation is expected to slow from 3.7% in 2023 to 1% between 2024 and 2026, reflecting the normalisation of imported fuel prices and the indexation rate of the escudo to the euro.
On the other hand, the budget deficit went from a surplus of 0.1% in 2023 to a negative balance of 0.7% last year, but is expected to improve to a surplus of 0.3% this year, driven by increased revenue and airport concessions.
After reaching 115% in 2023 and 109% last year, public debt is expected to fall to 98% of GDP in 2026.
Although the debt level is still well above the 49% average for countries rated B by Fitch, below the investment recommendation scale, the cost is much lower than in other countries, as much of the debt is concessional, analysts note.
Regarding next year's elections, Fitch says it does not expect "major changes in terms of growth or the fiscal trajectory in the event of a political transition," but warns that "there are risks from a potential reversal of reforms in public enterprises, which could pose considerable fiscal challenges in the medium term."
MBA/ADB // ADB.
Lusa
