SENEGAL

Key conditions andchallenges

Table 1

2023

Population, million

17.8GDP, current US$ billion

31.1

GDP per capita, current US$1753.3

International poverty rate ($2.15)

a9.9
a36.3

a75.6

Lower middle-income poverty rate ($3.65)
Upper middle-income poverty rate ($6.85)
Gini index

a36.2

School enrollment, primary (% gross)

b83.3

b67.1

Total GHG emissions (mtCO2e)36.4Life expectancy at birth, years

Source: WDI, Macro Poverty Outlook, and official data.
a/ Most recent value (2021), 2017 PPPs.
b/ WDI for School enrollment (2022); Life expectancy(2021).

Economic growth slowed slightly to 3.7
percent in 2023 due to social unrest anddelayed hydrocarbon production. The fiscal deficit and debt remained high, fueled by energy subsidies and frontloaded
financing. Inflation averaged 6.1 percent, eroding household purchasing
power, but poverty remains unchanged.
Economic activity is set to rebound in
the medium term, supported by hydrocarbon production. Political uncertainty,hydrocarbon production delays, andgeopolitical tensions threaten the outlook.

Senegal’s socioeconomic development
challenges are heightened by rising uncertainty. Declining yet high inflation andunfavorable global and domestic financial
conditions combined with high debt levels undermine macro-fiscal stability.
Structural vulnerabilities, such as low
productivity, limited human capital, highinformality, and youth emigration, persist
and are exacerbated by external shocks,
as seen during the COVID-19 pandemic
and Russia’s invasion of Ukraine. Despite
the emphasis on industrialization in theaction plan PAP3 of the government’s
Plan Senegal Emergent, the transition toa more diversified economy with a larger
industrial base remains limited, with theeconomy remaining heavily reliant on
agriculture and services. The onset of hydrocarbon production offers an opportunity to accelerate equitable investment
in human capital, provided that relatedresources are managed within a strong
governance framework.

Recent developments
Economic growth remained broadly
stable around 3.7 percent in 2023 (1.1percent per capita) as political tensions
and social unrest disrupted consumer
spending and delayed investment in key

sectors, including ICT, trade, and transport. As a result, the services sector decelerated from 5.1 percent in 2022 to 3.3
percent in 2023. Gold production declined
by 15.5 percent (year-on-year) due to lower demand, reserve depletion, and laborstrikes. Challenges in the extractive industry led to a slower-than-expected performance in the industry sector despite
strong cement sales. Headline inflation
averaged 6.1 percent in 2023 as food andenergy prices continued their downward
trends – although remaining well above
the regional Central Bank’s target bandof 1-3 percent. Poverty incidence (usingthe $3.65 per capita per day in 2017 PPP
international poverty line) remained stable at 36.4 percent in 2023, from 36.5 percent in 2022. While rising prices eroded
the purchasing power of households thiswas mitigated by growth in the agriculture sector, which employs most of thepoor. The national poverty trend is the result of a slight increase in urban areas,
while the poverty rate slightly decreasedin rural areas.
The fiscal deficit is expected to remain
at 6.6 – above the 4.9 percent ofGDP objective set in the 2023 Budget
Law – driven by lower tax collection
and persistently high energy subsidies.
The former declined to 17.3 percent ofGDP – about 1 percentage point below its 2022 level – owed to lower revenue collection on international trade.
Public expenditure declined to 25.7
percent of GDP from 26.6 percent,thanks to a decline in current spending. Fiscal measures to support purchasing power (0.6 percent of GDP)

FIGURE 1 Senegal / Evolution of main macroeconomic
indicators

FIGURE 2 Senegal / Actual and projected poverty rates andreal GDP per capita

Percent10Poverty rate (%)

Percent of GDP0

Real GDP per capita (constant LCU)

100

81200000

90-5

6470-1050-15-2202019

2021

2023e

20000010-25
201740000030-42015

60000040-20-6

80000060

201000000

8002025p02011 2013 2015 2017 2019 2021 2023 2025

GDP growth (lhs)
Primary fiscal balance (lhs)
Current account balance (rhs)
Source: World Bank.

International poverty rate

Lower middle-income pov. rate

Upper middle-income pov. rate

Real GDP pc

Source: World Bank. Notes: see Table 2.

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and energy sector subsidies encompassing
outstanding arrears (4.2 percent of GDP
end-September 2023) continue to hinder
fiscal consolidation efforts. Public debt remains at moderate risk of debt distress,
with limited margins to absorb futureshocks. The current account deficit is estimated at 14.5 percent in 2023 from 20 percent in 2022, driven by lower service imports related to hydrocarbon services, increased export prices, and the resumptionof trade with Mali. It was financed by foreign direct investments, portfolio investments, remittances, and external credits.
To counter inflation across WAEMU countries, the Central Bank of West AfricanStates (BCEAO) raised policy interest rates
by a cumulative 150 basis points since
mid-2022 to 3.5 percent for liquidity callsand 5.5 percent for the marginal lending
facility. However, inflation in the region(3.7 percent in 2023) was still above the1-3 percent target and foreign exchange reserves have been on a downward trend,
estimated at 3.5 months of imports atend-2023, down from 4.3 months at theend of 2022.

Outlook
Economic growth is projected to average
7.5 percent in 2024-2026 (4.8 percent percapita) and be broad based, driven by hydrocarbon production from mid-2024, anda rebound in the mining sector spurred by
the discovery of new gold and phosphatemines as well as agriculture and services.
Aggregate demand will be supported byprivate consumption. The baseline assumes favorable rainfall and fading political uncertainty. Inflation is forecasted todecelerate to 2 percent by 2025 as food andenergy prices maintain downward trends.
The BCEAO may need to continue monetary
tightening in 2024 to bring inflation undercontrol and in the context of rising uncertainties over the withdrawal of Niger, Mali,and Burkina Faso from ECOWAS and potential spillovers to WAEMU. These uncertainties are likely to increase investors’ risk
perceptions leading to tighter financing
conditions and putting additional strain on
already low foreign exchange reserves.

TABLE 2 Senegal / Macro poverty outlook indicators

Projected growth, including in agriculture,
the expansion of cash transfers, and declining food prices are expected to affecthousehold well-being positively. Consequently, poverty is expected to resume adownward trend in 2024.
Fiscal consolidation efforts, including reduced energy subsidies and increased tax
revenues, should enable the fiscal deficit todecline toward the WAEMU convergencecriteria of 3 percent of GDP by 2025. Undera benign base case, public debt is expected
to decline gradually to 67.2 percent in 2026.
However, extreme weather shocks or increases in security spending could delay
the necessary fiscal adjustment and exacerbate debt sustainability risks. The CAD
is projected to narrow significantly from
9.5 percent of GDP in 2024 to an average
4.7 percent in 2025-6 as hydrocarbon exports begin, although a potential risk remains as the Alliance of Sahel States withdrawal from ECOWAS will impact exports
to Mali. Regional uncertainties could leadto further tightening of financing conditions and put additional strain on alreadylow foreign exchange reserves.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private consumption
Government consumption
Gross fixed capital investment
Exports, goods and services
Imports, goods and services

2021
6.5
3.4
14.4
15.8
22.5
16.0

2022
3.8
3.5
1.511.0
3.5
12.4

2023e
3.7
2.3
-7.1
12.5
6.7
6.0

2024f
7.1
3.1
14.7
6.0
14.3
5.4

2025f
9.7
3.6
7.7
8.8
20.1
4.9

2026f
5.7
3.7
4.5
8.6
3.4
3.1

Real GDP growth, at constant factor prices
Agriculture
Industry
Services

6.3
0.8
7.1
7.7

3.6
0.3
2.6
5.1

3.7
6.2
2.9
3.3

7.1
6.3
16.8
3.2

9.7
6.4
23.4
4.0

5.7
6.5
3.9
6.5

Inflation (consumer price index)
Current account balance (% of GDP)

2.2
-12.1

9.7
-20.0

6.1
-14.5

3.0
-9.5

2.0
-4.8

2.0-4.6

Fiscal balance (% of GDP)
Revenues (% of GDP)
Debt (% of GDP)
Primary balance (% of GDP)

-6.3
19.5
73.4
-4.3

-6.6
20.0
76.1
-4.4

-6.6
19.2
79.5
-3.9

-4.8
20.8
72.4
-2.2

-3.0
21.8
67.5
-0.8

-3.0
22.3
67.2
-1.1

9.9
36.3
75.6

10.0
36.5
75.9

9.8
36.4
76.3

8.7
33.9
74.1

7.2
30.9
71.1

6.4
29.5
69.5

3.1
24.2

1.1
24.5

0.5
24.0

3.8
24.2

5.5
24.5

5.1
23.8

a,b

International poverty rate ($2.15 in 2017 PPP)a,b
Lower middle-income poverty rate ($3.65 in 2017 PPP)a,b
Upper middle-income poverty rate ($6.85 in 2017 PPP)
GHG emissions growth (mtCO2e)
Energy related GHG emissions (% of total)

Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD.
Notes: e = estimate, f = forecast.
a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026.
b/ Projections using microsimulation methodology.

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