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Senegal

Senegal

Population 16.7 million
GDP 1,474 US$
B
Country risk assessment
B
Business Climate
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Synthesis

major macro economic indicators

  2019 2020 2021 (e) 2022 (f)
GDP growth (%) 4.4 1.5 5.1 5.9
Inflation (yearly average, %) 1.0 2.5 2.1 2.3
Budget balance (% GDP)* -3.9 -6.4 -5.4 -4.8
Current account balance (% GDP) -8.1 -10.7 -12.1 -11.6
Public debt (% GDP) 63.8 68.7 70.9 70.1

(e): Estimate (f): Forecast *Grants included

STRENGTHS

  • Strong track record of political stability
  • Relatively diversified economy
  • Support from international donors under the Emerging Senegal Plan, in particular the IMF with its Economic Policy Coordination Instrument
  • Part of the West African Monetary Union (WAEMU)
  • Headway in terms of the business climate (average score, except for insolvency resolution) and governance (even though corruption persists)
  • Significant oil and natural gas reserves off the coast, as well as many other minerals, including gold, phosphate, platinoids, iron and barite
  • Fast population growth

WEAKNESSES

  • Growth and exports at the mercy of weather events and commodity prices (groundnuts, cotton, horticulture, minerals)
  • Net importer of energy and food products
  • Inadequate energy and transport infrastructure
  • Significant debt
  • Half the population is affected by poverty

RISK ASSESSMENT

Pending the start of hydrocarbon production, investment is boosting activity

After the slowdown resulting from the COVID-19 pandemic, activity rebounded and is expected to gain momentum in 2022. The risk associated with the pandemic will remain high as vaccination is progressing slowly, but the improvement in the vaccination rate should help avoid further strict lockdown measures in 2022. This will provide the impetus for an increased contribution by private consumption to economic activity. Agriculture, which directly employs 30% of the population, is expected to remain buoyant and will also drive household income and consumption. The latter will also benefit from expatriate remittances (10% of GDP), which should remain strong. Public investment, with support from private investment, will be a major driver of growth. As the start of commercial production approaches, scheduled for 2023, the development of the Grand Tortue Ahmeyin (gas, shared with Mauritania) and Sangomar (oil) hydrocarbon projects will make the sector a major recipient of investment. Agriculture, fisheries, textiles, information technology, tourism, energy (Sambangalou hydroelectric dam) and transport infrastructure, starting with the development of the Ndayane deepwater port, will also present opportunities for private companies. In addition, BioNTech, a German biotechnology firm, is expected to begin construction of a COVID-19 vaccine production facility by mid-year. Construction activity will therefore remain strong. Exports are expected to continue to grow, driven in particular by the booming gold mining industry. Petroleum products, thanks to favourable prices, but also fishery products, phosphoric acids, cement and groundnuts will contribute to export earnings as well. The easing of travel restrictions should support a partial rebound in earnings generated by tourism. Capital goods and fuel imports, however, will limit the net contribution of trade to growth.

 

Large twin deficits before the boost from oil and gas revenues

 

After peaking in 2020 because of the COVID-19 pandemic, the budget deficit has been on a gradual downward trajectory towards the WAEMU community standard (3% of GDP). In 2022, the deficit reduction will be mainly attributable to the increase in government revenues, accompanied by the continuation of the Medium-Term Revenue Strategy (MTRS). Pending the additional revenues generated by the development of hydrocarbon deposits from 2023, this strategy aims to broaden the tax base. In order to control spending, the focus on investment spending will continue. The upward trajectory of the debt, accentuated by the crisis, remains a source of concern, with interest set to absorb 11% of the internal revenue projected in the 2022 Budget Act. The authorities therefore intend to prioritise debt on concessional terms and on the regional financial market in order to limit the burden.

 
The large current account deficit is linked to the merchandise trade deficit (over 10% of GDP), which is due to imports of capital goods required for projects, particularly in the gas sector. The slight improvement in this deficit, thanks to brisk exports, should help reduce the current account deficit in 2022. In addition, the deficit generated by trade in services should be mitigated by increased tourism revenues. Debt interest will continue to generate a more marginal deficit in the primary income account. Remittances from expatriates and, to a lesser extent, from international partners, which contribute to the secondary income surplus, will temper the large current account deficit. FDI in numerous projects, particularly hydrocarbon development projects, will help finance the current account deficit, along with concessional borrowing. Recourse to external commercial debt should thus be limited.

 

Stable political situation but tensions simmer

The 2019 presidential election saw Macky Sall win a second term. Since 2017, he has had a large parliamentary majority (125 seats out of 165) through the Benno Bokk Yaakaar (BBY) coalition. His second government since his re-election, which he formed in November 2020, featured seven opposition figures, including one of his main opponents in the presidential election, Idrissa Seck. The government will continue to face discontent generated by high unemployment, particularly among urban youth, widespread poverty and the perception of growing inequality. Dissatisfaction with the government was particularly evident in the violent protests of March 2021, which were triggered by the arrest of opposition leader Ousmane Sonko and were fuelled by these underlying social conditions. The controversial question of a third consecutive term for Macky Sall will be a potential factor in tensions as the 2024 presidential election approaches. The legislative elections scheduled for July 2022 could also spark renewed tension. Nevertheless, while the BBY could lose seats, it still enjoys broad support, particularly in rural areas, and should be able to retain its majority, ensuring a degree of political stability.

 

Last updated: February 2022

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