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Thursday, May 26, 2011

Cape Verde's ratings out look is upgraded by Standard & Poor's

On May 24th, 2011, Standard and Poor's (S&P) announced a revised outlook on Cape Verde.

Click to show "Standard & Poor's" result 2I had reported earlier that S&P had assessed a B+ rating on the long-term sovereign debt of Cape Verde since December of 2008 and that a year later, in December 2009, S&P posted a negative ratings outlook on Cape Verde's debt. S&P's latest upgrade improves the outlook from negative to stable. At the same time, S&P reaffirmed the B+ rating on Cape Verde's long term soverign debt (B on short term debt).

S&P continues to express concerns about the Cape Verde's large public debt ratio, but notes that this is offset by the country's excellent political stability and moderately strong growth prospects based on steady foreign direct investments (FDI) of 7% GDP.

This most recent S&P Report and the improved outlook for Cape Verde strongly supports my view that with the continued effective fiscal leadership by the country's governement which is in place for 5 years until the next election, Cape Verde could step into a higher ratings class if the government were to take advantage of all of the economic opportunities that lie immediately ahead.

These additional opportunities, if pursued, may be sufficient to offset the stubbornly high unemployment rates, which S&P noted, have not declined even in the face of strong economic growth (I pointed out the reasons for this in my recent blog post about inter-island economic linkages), and the ties to European economies which could be problematic for Cape Verde if European growth falters.

After all, the primary purpose of this blog is to help Cape Verde diversify and balance its economic ties so that there is less concentration on European economic ties and greater ties with the US economy.

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