Macroeconomic performance
Estimated real GDP growth remains strong at 7.0% in 2018, slightly lower than the 7.2% in 2017, with primary sector growth of 7.8%, driven by agriculture and related activities. The secondary sector recorded growth of 6.9%, mainly due to the subsectors of extractive industries, agri-food and construction. Growth in the tertiary sector reached 6.7%, particularly thanks to retail sales. On the demand side, growth is driven by gross fixed capital formation (9.5%), intermediate consumption (7.7%) and final consumption (6.7%).

The budget deficit of –3.5% of GDP in 2018 is higher than the 3% in 2017, and financed mainly by the issuance of Eurobonds. The total external debt-to-GDP ratio was 64.2% in 2017 and 62.9% in 2018. However, the risk of debt distress remains low. Inflation stood at 1.4% in 2018, slightly higher than in 2017, due to a favourable agricultural season and a prudent monetary policy. The current account deficit fell from –7.3% of GDP in 2017 to –6.9% in 2018 thanks to the increase in exports of agricultural and fisheries products and the decline in imports. The terms of trade improved by 4.1%.

The strong growth recorded since 2015 is expected to continue in 2019 and 2020 thanks to continued public investment under the Emerging Senegal Plan. Consolidation efforts could reduce the fiscal deficit to less than 3 percent of GDP after 2020.

However, these projections are uncertain, in particular due to the rise in oil prices. However, Senegal could become an oil and gas producing country by 2021. There are other risks such as the accumulation of internal arrears, which would slow down the construction sector's activities, and the increase in current expenses resulting from social demands, which are characteristic of an election year. As a member of WAEMU, Senegal enjoys a stable macroeconomic environment, but it may experience a deterioration in competitiveness due to its lack of flexibility in the face of external shocks.

Outlook: positive and negative factors
As part of the Emerging Senegal Plan, the reforms of the Business Environment and Competitiveness Reform Program have been implemented. In the agricultural sector, they aim to simplify tax procedures and suspend or exempt certain taxes. In the energy sector, in 6 years, various investments and reforms have doubled the installed capacity to 1,250 M W in 2018. The energy mix plan has increased production and reduced the price of electricity by 10%. The operationalization of economic zones and industrial projects has provided companies with facilities that comply with international standards. However, to optimize these reforms, the authorities should strengthen land tenure and adapt the education system to future jobs.

In terms of regional integration, Senegal was one of the first to adopt and implement the WAEMU Common External Tariff, to sign the African Continental Free Trade Area Agreement and to implement port facilitation reforms to make the port of Dakar more attractive and safer, ratifying and implementing appropriate regional regulations. Senegal has also built roads and bridges to provide links with the Gambia, Guinea, Guinea-Bissau, Mali and Mauritania. In 2017, Senegal's exports to ECOWAS member countries accounted for 39.5% of total exports, and exports to WAEMU member countries (30.3%). To increase them and reduce the transaction costs related to the movement of people and goods, the authorities should develop transport infrastructure, in particular the Dakar-Bamako railway line.

Source: African Economic Outlook (AEO) 2019