The role of the Information and Communications Technology in strengthening the foundations for a sustainable and inclusive economic recovery

PRAIA — Cabo Verde’s pre-COVID-19 growth has been driven by a thriving tourism sector. It has benefited from deep structural reforms, including in the SOE sector, fiscal restraint, and debt reduction. When the COVID-19 crisis hit, Gross Domestic Product (GDP) contracted by 14.8 percent in 2020, the second largest reduction in Sub-Saharan Africa. As a result, fiscal risks were exacerbated, and public debt increased from 124 percent of GDP in 2019 to 155 percent in 2020.

The Cabo Verde Economic Update, published by the World Bank and titled ‘Cabo Verde’s Potential Digital Dividends’, states that although real GDP expanded by 7 percent in 2021, the country’s post-COVID recovery is now threatened by the global impact of the conflict in Ukraine, which is significantly increasing oil and food prices.

“The COVID-19 pandemic and the impact of the Ukraine war exposed the vulnerabilities of the Cabo Verdean economy to external shocks. It is important that the country drives structural reforms over the medium-term that promote private consumption and investment in digital economy, blue economy, and renewable energy to help close the output gap and support economic recovery,” said Eneida Fernandes, World Bank Resident Representative.

The report also discusses fiscal and debt vulnerabilities that remained high in 2021 due to the need to cover fiscal financial needs arising from the lingering effects of the pandemic. These fiscal vulnerabilities may undermine Cabo Verde’s efforts to restore fiscal sustainability and return debt (as a share of GDP) to a declining trajectory in the medium term.

“A gradual fiscal consolidation, leaving adequate space for social expenditures and public investment, is paramount to restore debt sustainability and support growth. The fiscal consolidation should be mainly focused on enhancing the efficiency of revenue and debt management and on key structural reforms, particularly in the SOE sector, to improve growth-supporting service delivery and lay out a better-levelled playing field for investors. In addition, reducing exposure to fiscal risks through better monitoring and management of these risks and greater transparency of the debt portfolio are key to ensuring fiscal sustainability,” said Rosa Brito Delgado, World Bank Country Economist and lead author of the report.

The report further notes that digital technologies have become an intrinsic part of sustainable growth across the world. COVID-19 caused disruptions in almost all aspects of socio-economic life and digital technologies gained heightened importance in not only short-term economic recovery plans but also in long-term, resilience building strategies. The pandemic-imposed crisis further underscored the role of ICT in increasing the productivity and resilience of Cabo Verde’s economy. In a special section on the key challenges to transform Cabo Verde into a Digital Hub, the report highlights four key policy priorities around the national digital transformation agenda to support long-term growth.

“With timely interventions and strategic investments in digital development space, Cabo Verde has a solid potential to build strong foundations for national digital transformation supporting a long-term, sustainable and inclusive growth. Digital dividends for the country include improving governance and public service delivery, creating new sources of income, jobs and economic diversification, and developing competitive workforce for the future economy,” said Camila Mejia Giraldo, World Bank Senior Digital Development Specialist.

 

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