Senegal

Despite further delays in major offshore upstream natural gas projects, Senegal’s GDP is expected to have grown by about +5% in 2023 and to accelerate to +8% in 2024 on the back of the start of LNG production and a new legislature that will benefit from higher revenues. The presidential election in February is the political cornerstone of the year and arrives after an ultra-long presidential campaign coupled with the exclusion of the main opponent for judicial reasons and unprecedented protests and repression throughout 2023. Our forecast for Senegal’s GDP growth for 2023–2024 reflects the economy’s strong fundamentals, continued IMF support and the assumption that oil and gas production will go online in H1 2024. Ongoing investment in agriculture, electricity production, information technology and transport will have a multiplier effect on the whole economy.

Year-on-year inflation reached a multi-decade high of +14% in November 2022, largely on account of food price increases, then cooled down gradually and is expected to average 4% in 2024. The CFA franc is pegged to the euro at 655.96 units per EUR1 and hence moves in tandem with EUR-USD swings.

The National Assembly passed the 2024 budget bill, which meets the IMF’s deficit objective of 3.9% of GDP and reinforces policy commitments for fiscal consolidation and debt sustainability. The budget law includes a consistent growth in tax income to 20% of GDP by 2025, as well as a progressive phase-out of untargeted energy subsidies, with a pledge to reduce them to 1% of GDP in 2024.

In February, Senegal’s voters will elect a new president after Macky Sall served the maximum two terms allowed. In a subregion plagued by coups in previous years, the country has distinguished itself through peaceful power transitions in recent decades. However, political tensions are likely to continue even after the election, with an effect on foreign investment and the overall business environment. In 2023, protests took place particularly in Dakar and the hinterland, as well as in the southern province of Ziguinchor, with several arrests and clashes between the Senegalese military forces and the secessionist Movement of Democratic Forces in the Casamance (MFDC).

The current lack of skilled local labor and the likelihood that the government will demand strict adherence to using local suppliers and subcontractors complicate Senegal’s goal of 50% local content for the oil and gas industry by 2030. Contract risks in the hydrocarbons sector have decreased as the government has pushed out many smaller operators to make room for better-resourced firms. Others who fail to reach an agreed-upon work schedule risk losing their concessions if they lack beneficial political ties and, more recently, discussions between a big operator and the government failed, resulting in the restart of an international arbitration process. The chances of expropriation are typically modest. Commercial dispute resolution is improving because of the introduction of a commercial court, but the judiciary remains understaffed and susceptible to political pressure, making contract enforcement more difficult.