For Cape Verde, the International Monetary Fund’s forecasts are lower than the government’s. At a global level, the improvements expected for the United States compensate for the declines in other advanced economies, in particular, the largest European countries.
When presenting the guidelines for the State Budget for next year, the Cape Verdean government estimated economic growth between 4.8% and 5.3%, the IMF Outlook, published this Tuesday, points to 4. 7%. Even so, this percentage is higher than expected for sub-Saharan Africa (4.2%), it is above that expected for middle-income African countries (3.9%) – a group of which Cape Verde is part – and makes the archipelago one of the PALOP countries with the best numbers: Guinea-Bissau leads with 5.0%, but after Cape Verde come Mozambique (4.3%), São Tomé and Príncipe (3.3%), Angola (2.8% ) and Equatorial Guinea (-4.8%).
This Outlook, published at this time to fit in with the Annual Meetings organized by the International Monetary Fund (IMF) together with the World Bank Group (WB), taking place in Washington, until the 26th, is not the most optimistic. Global growth is expected to remain stable, although disappointing. At 3.2% in 2024 and 2025, the growth projection remains practically unchanged compared to the updated World Economic Outlook for July 2024 and the World Economic Outlook for April 2024.
In emerging markets and developing economies, disruptions in the production and transport of goods – especially oil –, conflicts, civil unrest and extreme weather events have led to downward revisions to the outlook for the Middle East and Central Asia and for the Sub-Saharan region. These were offset by improvements in forecasts for emerging Asia, where rising demand for semiconductors and electronics, driven by significant investments in artificial intelligence, drove growth, a trend supported by substantial public investments in China and India. Five years from now, global growth is expected to reach 3.1% – even so, a mediocre performance compared to the pre-pandemic average.
Inflation and risks
Global inflation is expected to fall from an annual average of 6.7% in 2023 to 5.8% in 2024 and 4.3% in 2025, with advanced economies returning to their inflation targets sooner than market economies emerging and developing. As global disinflation continues to progress, obstacles remain on the path to price stability. Goods prices have stabilized, but services price inflation remains high in many regions, pointing to the importance of understanding sectoral dynamics and calibrating monetary policy accordingly.
Risks to the global outlook are tilted to the downside in a context of high political uncertainty. Sudden bursts in financial market volatility – such as those seen in early August – could make financial conditions more restrictive and weigh on investment and growth, especially in developing economies, where large short-term external financing needs could trigger capital outflows and over-indebtedness.
Further disruptions to the disinflation process, potentially triggered by new spikes in commodity prices in a context of persistent geopolitical tensions, could prevent central banks from easing monetary policy, which would pose significant challenges to fiscal policy and financial stability.
An intensification of protectionist policies would worsen trade tensions, reduce market efficiency and further disrupt supply chains. Increased social tensions could provoke social unrest, damaging consumer and investor confidence and potentially delaying the approval and implementation of necessary structural reforms.
As cyclical imbalances in the global economy ease, near-term policy priorities must be carefully calibrated to ensure a soft landing. In many countries, a change of direction in fiscal policy is urgently needed to ensure that public debt is on a sustainable path and to rebuild fiscal reserves; the pace of adjustment must be adapted to the specific circumstances of each country. Structural reforms are needed to improve medium-term growth prospects, but support for the most vulnerable must be maintained.
As the report highlights, multilateral cooperation is more necessary than ever to accelerate the green transition and support debt restructuring efforts.
Cape Verde in washington
The Minister of Finance is in the United States, participating in the Annual Meetings organized by the IMF and the World Bank. Olavo Correia will also be sworn in as President of the Board of Governors of both institutions.
“This meeting represents an excellent opportunity for the Government to continue strengthening bilateral contacts with the country’s main development partners and establishing new strategic partnerships, especially in the current context of enormous challenges”, wrote the government official on his Facebook page.
This year’s discussion agenda highlights topics such as economic recovery and climate investment, aiming to integrate development policies that respond to climate change and promote a sustainable future. The meetings will also serve as a forum for reporting and analyzing the global economic situation, as well as facilitating the formulation of policies that respond to the needs of developing countries.
“My agenda includes meetings aimed at strengthening cooperation with Cape Verde’s development partners (WB, IMF, AfDB, BADEA, IFC, Kuwait Fund, Saudi Fund, China Import-Export Bank, Africa50, AFC, among other entities partners), in addition to establishing contacts with various financial institutions and companies, with the aim of presenting the priority areas for investments in our Archipelago, which are included in the new National Strategic Plan”, said the Minister of Finance.
Text originally published in the printed edition of Expresso das Ilhas nº 1195 of October 23, 2024.
