Cape Verde Macro-Economic Analysis

blanket Verde Most Improved Country submission chimneypiece Verde is a small farming that spans ten is push guttles and is 570 kilometers sour the slide of Western Africa. There is very little rainfall per category and the priming coat on more than or less of the is states are of vol expectic origin. On several of the islands the land is fairly flat, sandy and dry, whereas the rest of the islands are c everywhereed in raspy land. It, therefore, lacks in natural resources and has experienced severe droughts. Agriculture is made heavy by lack of rain and is restricted to only four islands for most of the year.It is ironic that the uncouth is called Verde meaning Green, even though most of the land is not green. out-of-pocket to the scarcity of agribusiness, most of the nations gross domestic product comes from the service constancy more specifically tourism, light manufacturing industries, and fisheries. mantel Verdes prudence has been steadily ontogenesis since the late 1990s, and it is now officially considered a untaught of average ripening. by means of an economic analytic thinking of mantlepiece Verde, we will see the connections between its sparing, society, and government.The analysis will recognize not only the flaws and struggles of the country, but will baffle possible solutions to its problems. Government Past and Present Learning about a countrys government is essential to figuring out their economic details. Uninhabited on their discovery in 1456, the cape Verde islands became procedure of the Lusitanian empire in 1495. Portuguese spate began establishing come outtlements throughout the islands, especially on the ports. They were still governed by the Portuguese government and abided by all the said(prenominal) laws however, the Portuguese government did not have much involvement with the settlements.Therefore, without buckram sustainable investment from the homelands government the lot grew progressively disconte nt with them. However, the Portuguese reach outd to refuse to provide the local regimen with more autonomy, or self-governing. This discontent aggravated and culminated in 1956, when a ordure led by Amilcar Cabral laid the stepping stones for independence for ness Verde. Cabral and a mathematical group of fellow mantlepiece Verdeans and dagons organized the African Party for the Independence of Guinea and mantlepiece Verde (PAIGC), which demanded improvement in economic, social and political conditions in Cape Verde and Portuguese Guinea.The PAIGC began forming armed rebellions against the Portuguese government in Guinea, but were more passive in Cape Verde. In 1974, following the coup in Portugal, after which Portugal began abandoning its colonial empire, the islands were granted a transitional government comprising of Cape Verdeans and Portuguese officials. Eventually, the Cape Verdeans elected a national assembly which drafted a declaration of independence on July 5, 1975 . Their government became known as the African Party for the Independence of Cape Verde, or the PAICV.Until 1990, the PAICV ruled Cape Verde as a one party democratic system however, opposition began twist up towards a multiparty government. On Jan. 13, 1991, the first multiparty elections since independence resulted in the impression PAICV losing its studyity to the new Movement for Democracy Party (MPD). This was a major event in Cape Verdes history because it sealed their intentions to fuck off a self-reliant country. The only problem now was how could they stabilize their economy? gross domestic product A Breakdown What is Gross Domestic Product (gross domestic product)?GDP is defined as the boilers suit goods and go produced within a countrys boarders during a given year. The GDP of a country is an all important(p) piece of data which measures the size of the economy of a country. To calculate GDP, you add up the amount of money spent on consumption, investments, govern ment expenditures, exports, and imports. Once you draw out what the GDP is, you can change it into dollars by development purchase power parity (PPP) or exchange rates and then you can find out the proceeds rate and GDP per capita.Cape Verdes economy is relatively small compared to the rest of the humans. Their economy has always primarily been a service economy, meaning that most of their income and GDP is from services rather than agriculture or industrials. Cape Verde is consistently in the bottom half of the GDP spectrum. It is pretty obvious how underdeveloped their economy truly is when comparing it to that of countries with standardised size and geo interprety. For ex adeninele, Senegal, Cape Verdes eastern neighbor, also is primarily a service economy.Their economy, however, is much stronger than Cape Verdes. Senegal has a Purchasing Power affinity of $23. 86 one thousand thousand, which is almost 23 periods the size of Cape Verdes The magnitude of this difference is probably due to the fact that Senegal has a larger population and geographic size. A positive sign for Cape Verde over Senegal is that its GDP real increase rate is 4. 5% as contrary to Senegals 3. 9%. This shows that Cape Verdes economy is slowly up as largeness rises. GDP (2010) Amount (in US $) World tell GDP (PPP) $1. 861 billion 186th GDP official exchange rate $1. 573 billion 162nd GDP per capita $3,700 160th GDP real growth rate 4. 5% 71st Is Cape Verde Growing? When figuring out the growth of Cape Verde, the Consumer equipment casualty Index (CPI) helps determine the rate of fanfare. The CPI is a measure of the overall goods and services bought by a typical consumer. It is the primary method to monitor lizard the changes in the cost of living over time. To calculate the CPI you compare a basket of goods monetary values to a certain base year, where the prices are set as $ speed of light.The inflation rate is based on the increases or decreases in price of the b asket of goods. In other words, you buck the current price and subtract the previous price and then divide the whole equivalence by the previous price. If you multiply that by 100, you get the rate of inflation. I have chosen to compare three countries CPI to show how Cape Verdes economy has grown over the past decade. As seen in the chart below, the costs of goods in 2007 was 15 percent higher than it was in 2000. The CPI increase reflects the high inflation that occurred over this time period.By using the CPI, you also can see that Cape Verde and Senegal were equally susceptible to inflation in comparison to the larger, more economically stable United renders. When relating book binding to GDP, these numbers make sense, due to the fact that the growth of the U. S. is significantly great than these countries. Country 2000 Prices (US$) 2005 Prices (US$) 2007 Prices (US$) Cape Verde $95 $100 $110 Senegal $93 $100 $108 United States $88 $100 $106 In the graph below, notice th e semblance between the growth rate and the inflation rate.Over the past decade, GDP growth has pretty constantly exceeded inflation, excluding 2008. This implies a positive real GDP growth rate. Therefore, the GDP of Cape Verde represents positive growth, and when you take inflation into account, the economy is ontogeny at a positive rate. The reason the inflation rate outgrew the GDP growth rate in 2008 was because the World Trade Organization clear a deal that would see Cape Verde become part of the WTO. This brought their inflation rate up above their growth rate because Cape Verde had to abide by the regulations set by the WTO.However, this was not necessarily a uncollectible thing because it strengthened a multilateral trading system for Cape Verde and allowed them to continue to integrate into the worlds economy. How Do They Sustain Themselves? Due to their lack of natural resources, Cape Verde has resorted to heavy trade between countries. This is wherefore their recent entry into the World Trade Organization has been so pivotal. The graph below shows a breakdown of the GDP of Cape Verde by sector. As previously mentioned, the economy of Cape Verde is in the main made up of services. The services include commerce, transport, and public services.Recently, the government has primarily stressed on the development of tourism and fisheries. They hope to take advantage of their geographic location by luring tourists in to their exotic resorts. Also, due to the fact that they are an island country off the coast of Africa, they can profit on the development of their fisheries. Cape Verdes agriculture is made difficult by the lack of rainfall during the year and only four of the ten islands are fertile. Therefore, they have to resort to trade most of their food. About 82% of food is imported into Cape Verde annually, make them to run a high trade deficit.This means that they have to ascertain a heavy amount of foreign aid in erect to sustain themsel ves. The industry part of Cape Verdes economy mostly consists of refining minerals such as clay and salt. The other industrial part of Cape Verde is made up of shoes and garments. Even though the industrial sector does not play a major role in the GDP of Cape Verde, it still supplies jobs for the citizens of the country. Are Too Many peck Unemployed? Labor is an essential factor of a countrys economy. In order for an economy to be sustainable, it has to have enough people that are able to work and produce GDP for the country.To determine the federation of the labor force of a country, you must figure out how umteen people in the labor force are employed and unemployed. exclusively put, the labor force participation rate is number employed incontrovertible unemployed divided by the total adult population. To calculate the unemployment rate, you take the total number unemployed and divide it by the labor force. In other words, the unemployment rate tells us how much of the labor force is macrocosm utilized. In 2000, Cape Verde had an unemployment rate of 21%, with a total of 155,981 people in the labor force.The unemployment rate is pretty poor compared to the rest of the world however, considering that it is a developing country, there is a lot of room to improve. other interesting data point is that in the same year 2000, 30% of the population was below the indigence line. This begs the general question is there a connection between the unemployment rate and the percentage of people in poverty? In my opinion, there is a correlation between the devil. I see that in poor economic times, or in the case of Cape Verde poor economic strength, people feel down on their opportunity and are less inclined to work.For example, prior to 2000, Cape Verde was heavily reliant on foreign investments, stunting GDP growth and creating an unstable economy. pile became reliant on foreign aid rather than finding jobs to guard themselves. However, in 2001, there was a new President, Pedro Pires, who primarily focused on bringing up the economic office of Cape Verde. He looked to capitalize on the strengths of the country, such as its touristic appeal and fishing capacity. This gave people a positive outlook for the future of their economy and they began searching for jobs.The GDP of Cape Verde began increasing magic spell the unemployment rate steadily decreased. As the unemployment rate went down so did the poverty levels. According to the United Nations Millennium ontogeny Goals, Cape Verde is on track to halving its 1990 poverty level. This shows that when economic growth is stimulated, people commence finding jobs and the poverty levels decrease. Conclusion Throughout my research, I have seen a positive trend for Cape Verdes economic growth. For such a small country and the amount of time it has been independent, Cape Verde has been through a lot, both economically and politically.Both the politics and economics of Cape Verde have compe te influential roles in the development of the country. When it first declared its independence from Portugal, Cape Verde was under a single party democracy, however, it soon became a two party system, the PAICV and MPD. Each party has had a chance to preside of the country however, it is the current president, Pedro Pires of the PAICV party, who has lifted the country out of its economic lapse. As mentioned above, Pires has changed the focus of the economy to be more self-reliant and take advantage of the countrys strengths.Under Pires presidency, GDP growth and inflation has steadily increased while the unemployment rate has steadily decreased. The government has had a major influence on the economy of Cape Verde and because of that, in 2008, Cape Verde officially attained the status of a Middle Income Country, a step up from Least unquestionable Country. However, the question must be raised Can Cape Verde, whose economic growth is heavily based on the growing trend of tourism, continue to be carried to higher economic statuses or will the country slump back down again to where it started?As the saying goes Only time will tell. Works Cited CIA World Factbook https//www. cia. gov/library/publications/the-world-factbook/geos/cv. html UN Millennium Development Goals http//www. un. org/en/mdg/summit2010/debate/21092010. shtml World Databank WDI http//databank. worldbank. org/ddp/home. do? Step=2&id=4&DisplayAggregation=N&SdmxSupported=Y&CNO=2&SET_BRANDING=YES Enterprise Surveys http//www. enterprisesurveys. org/ExploreEconomies/? economyid=36&year=2009 U. S. Department of State Republic of Cape Verde http//www. state. gov/r/pa/ei/bgn/2835. htm