This year Cape Verde became only the second country ever to graduate from the UN`s list of poorest countries, but the African success story is now feeling the heat from the global financial crisis.

Located in the Atlantic Ocean some 500 kilometers (300 miles) off the coast of Senegal in West Africa, the island group`s main sources of income are tourism and remittances from Cape Verdeans living abroad -- just the sectors likely to be affected by the financial turbulence.

`Of course we are worried. We will see the repercussions (of the crisis) in the sectors that are the motor of our economy: foreign direct investment, tourism, real estate and remittances,` Pericles Silva of the national Banco de Cabo Verde department of economic studies and statistics said.

The tourism real estate boom that Cape Verde had been enjoying in the last few years with British, Italian and Irish holiday makers buying vacation homes has already seen a slow down, he added.

In January the island group graduated from the United Nations list of Least Developed Countries to Middle Income Countries and in 2006 it boasted economic growth of 10.8 percent.

In 2007 Gross Domestic Product (GDP) growth was at 7.2 percent and is set to slow down further to 7.0 percent in 2008 and expected to be between 6 and 6.5 percent in 2009, Cape Verdean Economic Affairs Minister Fatima Fialho told AFP.

Cape Verde has been a donor darling and a rare West African success story renowned for its political stability and good governance. But economists worry that the archipelago is vulnerable.

`We are very dependent on the outside world,` minister Fialho told AFP.

`Cape Verde imports the majority of its food needs, petrol and financial resources,` she explained.

`Its vulnerability is mainly due to this strong dependence,` the minister said, vowing that she would work to make the archipelago more self-sufficient.

Experts warn that the global financial crisis will hurt tourism investments, which currently make up some 90 percent of all foreign direct investment and the remittances from emigrants living abroad.

There is a big diaspora with almost twice as many people of Cape Verdean descent living abroad, mostly in the United States and Europe, as the nation`s population of 475,000 people.

Direct foreign investment and remittances make up respectively 20 percent and 10 percent of Cape Verde`s GDP.

Paulo Monteiro, an economics professor at the Praia institute for legal and social sciences, explained that the impact of the crisis could be seen in the balance of current accounts.

`The deficit (in the current accounts balance) is currently estimated at 10.6 percent of GDP while it has been an average of 7.0 to 8.0 percent in the last years,` Monteiro said.

According to the economist there is already a downturn in tourism investments in housing and the restaurant sector.

The government is trying to reduce Cape Verde`s external dependency and according to Monteiro is trying `to change the economic model to boost exports of goods and services and domestic savings.`

The minister for her part is `optimistic` about the future `despite the present challenges,` she told AFP.

`We have an agenda for an economic change. Cap Verde can become a country that provides services linked to port activities, tourism, finance, fishing and transport. We want to be a hub for air and sea transport,` she told AFP.

The plan is somewhat of a throwback the 19th century when Cap Verde flourished as an important shipping refueling station because of its strategic position in Atlantic shipping lanes between Africa and the Americas.

Now Cape Verde wants to set up a free-trade zone, likely to be on the island of Sao Vincente with an important harbour and is trying to reduce its dependence on petrol.

`Our objective is to produce 50 percent of our electricity from renewable sources by 2020,` mostly from solar and wind energy, Fialho said.