Overview

Senegal surrounds its much smaller Anglophone neighbor, Gambia, as well as bordering its Francophone colleagues—Guinea, Mali, and Mauritania. Relatively dry, its shoreline runs along the Atlantic Ocean at the Sahel’s westernmost point. Up to half its population of 15.4 million (2016) is concentrated around Dakar and other urban areas.

Political Context

Senegal has been among Africa’s most stable countries, with only three major political transitions—each peaceful—since independence from France in 1960. The next presidential election is due in February 2019, but incumbent Macky Sal may be the last president to serve for seven years as a constitutional referendum in 2016 cut mandates to five.

In 2017, the ruling coalition Benno Bokk Yakaar party (“United in Hope" in the widely-spoken Wolof language) won 125 of 165 seats but fell short of the popular vote. A dozen other parties hold seats in the national assembly, including the Coalition gagnante Wattu Senegal, Manko Taxawu Sénégal, and Parti de l’unité et du rassemblement.

Senegal has so far been spared regional security shocks, but activism by terrorist groups in neighboring countries and the higher number of radicals entering the country are factors that risk fueling instability.

Economic Overview

Since changing the year—to 2014 from 1999—used as a base for calculating the size of the national economy, the economy has grown by 30%. As a result, Senegal’s 2016 GDP increased from $15.3 billion to $19.6 billion; per capita GNI increased from $953 to around $1,230; and public debt to GDP fell from 60.4% to 46.8%.

Annual economic growth has held at over 6% since 2015, accelerating from 6.2% in 2016 to 7.2% in 2017, and expectations for 2018 are optimistic—though high oil prices and other fiscal constraints may have a moderating affect.

The primary sector has been the fastest growing, particularly agriculture, due to support programs and robust external demand. This is followed by the tertiary sector, thanks to financial and intermediation services, the hotel sector, and transport. The secondary sector has slowed despite good performances in food industries, chemicals, and energy.

There are concerns over the country’s macro-fiscal framework: although the fiscal deficit fell from 3.3% of GDP in 2016 to 3% in 2017, the fiscal stance deteriorated due to arrears in government payments to private and public suppliers that could have pushed the 2017 deficit up to around 5% of GDP. Rising international oil prices, coupled with unchanged domestic energy pricing, explain much of the imbalance.

Public debt continued to increase, but remains at low risk of distress, partly due to the GDP rebasing. Debt increased from 47.8% of the rebased GDP in 2016 to 48.3% in 2017, while debt service remains high at 32.6% of fiscal revenues. Senegal’s debt may reach 49.4% of GDP in 2018, partly due to the issuance of a Eurobond (worth $2.2 billion in March 2018).

The external Current Account Deficit (CAD) also deteriorated, due to higher oil prices and stronger imports of capital goods. The CAD widened from 4.2% of GDP in 2016 to 7.3% in 2017, despite the good performance of exports, which increased 11% in volume, driven by agriculture, food-products, and extractives. Imports grew even faster, driven by oil-related products (+34%) and capital goods (+20%), due to higher oil prices and stronger domestic demand for goods.

The CAD is expected to worsen again in 2018 to 8% of GDP, mostly due to high oil prices, but would improve afterwards from stronger exports.

Medium-Term Outlook

Senegal's medium-term economic prospects will remain positive for as long as its new structural reforms are sustained and deepened, and the external environment remains benign. Economic growth is projected to hold at over 6% for 2018. Its blueprint for becoming a middle-income country sets targets of over 7% growth in following years, though rising energy prices and other fiscal and external pressures may prevent this.

To accelerate economic growth, Senegal will need all its economic drivers pointing in the same direction at the same time. This means more reforms to resolve bottlenecks in productivity and competitiveness; sustaining a credible fiscal policy and avoiding currency overvaluation; and putting the country in a position to reap the benefits of a positive international environment.

Social Context

National poverty was last measured in 2011 at 46.7% (national poverty line) and 38% using the international poverty line (US$1.9 PPP). No new household consumption data have been collected since, but strong growth suggests a decrease in monetary poverty, driven by the primary sector in rural areas, and construction and services in urban areas.

Non-monetary indicators also improved (access to services and assets ownership) but they suggest a stagnation of inequality. Questions on inclusiveness remain pertinent as job creation is insufficient to absorb internal migration and a growing labor force. Furthermore, most labor is informal, entailing low remuneration, underemployment, and limited social protection.

Poverty should begin to fall faster—from 34% in 2017 to 31.2% in 2020 (IPL)—and by 2020, the decline in the number of poor that started in 2016 should accelerate due to agricultural growth. Under this scenario, poverty reduction in urban areas would be driven by services, remittances, and public construction.

If PSE reforms continue, the poor would progressively be able to access high growth or value-added sectors, such as horticulture or agricultural processing, while the enhanced pro-poor programs that have been unfolding since 2014–15 (including the adaptive social protection may reduce vulnerability and build up the asset base of the poor.

lastupdated: Nov 16, 2018