Population 13.766 million
GDP 13.95 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
4.1 |
2.6 |
3.7 |
4.3 |
|
Inflation (yearly average) (%)
|
1.2 |
3.4 |
1.5 |
1.6 |
|
Budget balance (% GDP)
|
-7.8 |
-8.9 |
-8.8 |
-7.6 |
|
Current account balance (% GDP)
|
-4.4 |
-6.1 |
-7.6 |
-7.1 |
|
Public debt (% GDP)
|
35.7 |
40 |
45 |
46.8 |
|
(e) Estimate (f) Forecast
|
||||
STRENGTHS
- Return to more sustained growth, driven, in particular, by major investment projects
- Support of the international financial community via debt cancellations (2004 and 2006)
- Enhanced political stability
WEAKNESSES
- Activity and exports subject to vagaries of the weather, irregular energy supply and movements in the price of commodities
- Inadequate infrastructures (energy, transport)
- Public and external account imbalances
- Poverty and regional disparities
Risk assessment
Growth driven by infrastructure spending
After slowing sharply in 2011, due to the drought, economic activity recovered in 2012, driven by higher public investment in infrastructure and the resumption of agricultural production. The acceleration of major infrastructure and mining projects is expected to boost growth in 2013. Infrastructure spending, financed by a ten-year $500 million bond issue in 2011, and the gradual improvement in the electricity supply, thanks to measures taken under the Takkal plan, adopted in the same year, are expected to easily offset the effects of a less buoyant external environment. Inflation has been brought down to well below the 3% target set by the UEMOA, due to the recovery in agricultural production and subsidies.
Growing public and external account deficits
Exports, half of which go to Mali, the eurozone and India, and which are concentrated on refined oil products, phosphoric acid, seafood, gold and cement hardly grew in 2012. The current account deficit continued to widen, due to higher imports of fuel, food and capital goods. Sales of goods and, to an even greater extent, expatriate workers’ remittances and tourism revenues remain dependent on economic developments in western countries. The public accounts have also worsened in recent yeas, in response to various shocks, the scale of subsidies and rising capital spending. Public debt thus grew strongly, rising in 2012 to it 2006 level, when it was cancelled under the multilateral debt relief initiative (MDRI). The risk of overindebtedness remains contained but this evolution needs watching, as is potential recourse to non-concessional borrowing.
Structural reforms need to continue
Progress has been made on restructuring key sectors. Chemical Industries of Senegal has consolidated its financial position and the national electricity company reported, in October 2012, that it had produced more energy than the country had consumed, allowing it to export the surplus to its neighbours. The company remains very indebted, however, and there are still shortcomings in the transport and distribution of electricity as in the diversification of supply sources, as well as a need to improve governance in the sector.
The country’s greater growth potential is based on accelerating reforms, including those in the energy sector, and an improved business environment, apt to encourage development of the private sector and strengthen the country’s attractiveness in the eyes of investors. The authorities are relying on political stability to boost the mining sector (zircon, gold, iron ore, phosphates) but the announced review of mining contracts could, in the short term, create uncertainty.
Enhanced political stability but major economic and social challenges ahead
Following the protests triggered by Mr Wade’s controversial candidacy for a 3rd term, the country finally underwent a smooth political transition after Mr Sall comfortably won the presidential elections in March 2012. The president confirmed his victory in July 2012, when his coalition won a big majority in the parliamentary elections. The Head of State thus has a strong mandate, even if he has to accommodate differences of opinion within the majority. There are still major economic and social challenges. The government cannot afford to disappoint the expectations of the population as much regarding governance and the fight against corruption, as reducing poverty, providing basic services and cutting the cost of living. Meanwhile, tensions in Casamance (in the south of the country) persist and the situation in neighbouring Mali is a source of worry.
