| Recent macroeconomic and financial developments |
| The real GDP growth rate rose from 3.8% in 2022 to 4.3% in 2023, driven by the resilience of the agricultural sector. While services experienced a downturn (from 6.7% growth in 2022 to 3.9% in 2023), due to restrictive measures on the Internet and transport, GDP growth was sustained by agriculture and industry. Inflation fell from 9.7% in 2022 to 5.9% in 2023, responding to government efforts and tighter monetary policy by the Central Bank of West African States, which raised the minimum liquidity injection rate from 2% in 2022 to 3.25%. |
| Due to increased revenue and rationalized subsidies, the budget deficit narrowed from 6.5% of GDP in 2022 to 4.9% in 2023. The fiscal deficit buildup led to an increase in debt from 76% of GDP in 2022 to 80% in 2023. The current account deficit narrowed from 20% of GDP in 2022 to 15.2% in 2023 due to reduced oil investment. The financial sector performed well, with equity rising 13.4% in 2023 and nonperforming loans falling from 11.3% of gross loans in 2022 to 9.9% in 2023. Credit to the private sector increased by 20.8% in 2023 against 22.2% in 2022. |
| According to the National Agency for Statistics and Demography, the poverty rate fell from 38% in 2011 to 32.9% in 2019, due to rising agricultural income, higher public investment, and stronger social services. However, according to the World Bank, that trend has been reversed by recent shocks, and the poverty rate was projected to rise from 35.9% in 2021 to 36.3% in 2022. extended unemployment fell from 24.1% in 2021 to 19.5% in 2023 and affects women (32%) more than men (10%). |
| Outlook and risks |
| Projected oil production for 2024 makes the macroeconomic outlook very favourable. Economic growth is projected to reach 9.3% in 2024 and 10.2% in 2025. The fiscal deficit is projected to narrow further to 4% of GDP in 2024, with the implementation of measures to reduce energy subsidies from 3% of GDP in 2023 to 1% in 2024. These efforts and the robust growth prospects are expected to reverse the upward trend in debt. The external position is expected to further improve with the start of hydrocarbon production in 2024. However, this outlook faces major risks if there is a lack of consensus on the review process for oil and mining contracts. Other risks to the macroeconomic outlook include structural vulnerability linked to climate change, delay in oil production, Russia’s invasion of Ukraine, the war in the Middle East, deterioration in terms of trade, and tightening financial conditions. Greater macroeconomic stability and economic diversification are key to mitigating these risks. |
| Reform of the global financial architecture |
| Over time, the structure of the economy has shifted to services. As the agricultural sector’s share of employment declined from 50% in 2000 to 20% in 2022, the services sector’s share rose from 38% to 56%. The services sector has made the greatest contribution to productivity through intersectoral growth, facilitating the flow of labour from the low-productivity agricultural sector. The government’s Plan for emerging Senegal has identified flagship projects (the Train Express Regional, highways, renewable energy) to boost productivity. Structural transformation could be accelerated through the implementation of the new industrial policy, the private sector development strategy, and agricultural growth poles. |
| To accelerate structural transformation, Senegal will need to mobilize more resources on international capital markets. Senegal raised $5.3 billion in Eurobonds between 2009 and 2021, reflecting the country’s stability and solid institutions. Reforming the global financial architecture should enable the country to mobilize additional financing on more favourable terms. But to take full advantage of these financing options, the government needs to maintain macroeconomic stability to bolster the confidence of international investors, focus on public securities in local currency, deepen the regional market with the introduction of green bonds, and prioritize external financing on concessional terms. Support from international financial institutions will also be needed, with guarantees for borrowing on competitive terms. |
| For the full document click the link below: |
| Senegal: Macroeconomic outlook GPD |
