Macroeconomic Performance
Table 1: Overview of some macroeconomic indicators
Senegal recorded an average growth rate of 4.6 per cent over the last five years. Senegal’s economic growth slowed to 4.7 per cent in 2022, from 6.1 per cent in 2021, as production costs surged, on the back of an increase in general price levels. Average inflation increased to 9.7 per cent in 2022, up from 2.2 per cent in 2021. Fiscal balance improved slightly to -6.1 per cent of GDP, from -6.3 per cent of GDP, driving the debt-to-GDP ratio to 75.0 per cent, from 73.2 per cent in 2021. The current account balance worsened to -16.0 per cent of GDP, from -13.6 per cent of GDP in 2021, mainly as a result of an increased import bill.

Senegal’s economy is projected to grow by 7.6 per cent in 2023 and 8.7 per cent in 2024, boosted by the growth in the traditional sectors of the economy and also oil production, with first oil from the Sangomar oil field expected in 2023. The projected growth in GDP is forecast to drive down the debt-to-GDP ratio to 73.1 per cent of GDP in 2023 and further to 69.9 per cent in 2024. Inflation is projected to ease from the decade’s high of 2022 to 8.7 per cent and 5.4 per cent in 2023 and 2024, respectively, in line with global trends. The additional revenue from the oil and gas sector will lead to a projected improvement in the fiscal balance to -4.9 per cent of GDP in 2023 and to -4.0 per cent of GDP in 2024. The increased use of domestic gas for energy production, among other factors, is expected to help reduce the import bill for petroleum products, leading to an improvement in the current account-to-GDP ratio of -11.4 per cent in 2023 and -5.0 per cent in 2024.

Probable Headwinds
Failure to realise the projected revenues from the upstream petroleum sector would mean that Senegal would have to increase its borrowing on the domestic market, with its attendant impacts on private sector borrowing.  The high cost of borrowing will further increase fiscal costs in 2024 and the debt-to-GDP ratio, which has already crossed the 70 per cent threshold. The return of inflationary pressures will adversely affect businesses, with implications for government revenue mobilisation. The authorities need to take steps to bring the recent socio-political tensions in the country under control to avert possible adverse effects on economic activity.

Enter your keyword