Since the beginning of this year, Cape Verde's tourism sector has been growing rapidly after a year of low revenues. The sector is a main factor behind Cape Verde's projected 6 percent GDP growth in 2010.
In 2009, Cape Verde's tourism-driven economy basically reached a stand-still. There were major concerns that the global crisis, which hit many of Cape Verde's main tourist markets especially hard, would dramatically reduce tourist arrivals to this long distance destination and halt investments in the booming hotel and holiday apartment construction industry.
Indeed, GDP growth in 2009 was reduced to 3 percent. Corrected for population growth, GDP per capita in Cape Verde thus grew by only 0.2 percent - a veritable halt in growth - according to data from the International Monetary Fund (IMF) and the Cape Verdean Ministry of Finance.
During the crisis year, foreign direct investment and remittances from Cape Verdeans abroad slowed - as feared. Also revenues from the tourism industry decreased and the transportation and construction sectors contracted. Only the strong rains, providing for record harvests, managed to save a positive GDP development.
Nevertheless, the Cape Verdean tourism industry in an exemplary way managed to manoeuvre through the crisis. The industry "maintained solid growth in the number of hotel nights by slashing prices," according to an IMF analysis.
According to statistics from the Bank of Cape Verde, tourism receipts peaked in 2007 and 2008. In these two years, revenues from tourists accounted for around 22 percent of Cape Verde's GDP. In 2009 and 2010, tourism receipts are projected at only 17 percent of GDP.
But, buy reducing prices, Cape Verde managed to recruit a large number of new tourists to the archipelago during 2009 and the first half of 2010. This is now starting to pay out.
An IMF mission led by analyst Valerie Cerra, staying two weeks in Cape Verde tourist arrivals and spending
While the numbers of tourists went up during the crisis, tourists spent much less during their stay in Cape Verde
Praia, yesterday announced its new, optimistic view of developments on the archipelago. Ms Cerra concludes that Cape Verde's economy already has started on a new round of strong growth, mainly driven by the recovery of the tourism sector.
"The tourism sector stabilised in the first half of the year, and is poised for solid growth in the second half," Ms Cerra said in a statement. Government could now go on investing in "much needed infrastructure in ports and airports" to further help strengthening the tourism sector, she added.
The Fund's analysts also expect foreign investments in Cape Verde to pick up strongly this or next year. Such investments, mostly related to the tourism sector, would provide for a new round of growth for the Cape Verdean construction sector.
These optimistic outlooks related to the tourism industry are already expected to provide for a full recovery of Cape Verde's economy and GDP growth. Only in July, the IMF was still rather pessimistic about a strong growth in the Cape Verdean economy during 2010. The July projection put GDP growth this year to a modest 4.1 percent.
This weekend, however, Cape Verde's Finance Minister Cristina Duarte could reveal an upscaled growth projection for this year. Quoting an analysis by the National Statistics Institute, Ms Duarte said the national economy had already "entered a positive trend" and that GDP would grow by around 6 percent this year.
According to the Ministry and the IMF, this is only the beginning of a period with strong growth in Cape Verde. Between 2011 and 2015, the Fund expects annual growth rates of at least 6 percent and up to 8 percent. The tourism industry will remain the main motor of growth.