Senegal

In 2022, Senegal's economy experienced a sharper-than-anticipated slowdown, with real GDP growth estimated at about +4% (-0.7pp), reflecting a disappointing harvest season and a contraction in industrial production. Average inflation reached a multi-decade high of 9.7%, largely on account of food price increases.

Our forecast  for Senegal’s GDP growth for 2023-2024 reflects the economy's relatively strong fundamentals, continued IMF support and the assumption that oil production starts toward the end of this year. We expect the Senegalese economy to grow by +7.5% in 2023 and above +8% in 2024, making it the fastest-growing economy in Africa. The recovery of tourism and new hydrocarbon extraction will provide a substantial boost and may give the current administration strong means to retain power and continue pursuing its reform agenda despite increased confrontation.

Political tensions will continue in 2023-24 with an effect on foreign investment and the overall business environment. The president is likely to ignore constitutional restrictions and run for a third term as head of state in 2024, while a main opponent is on trial and protests increase in Dakar. Social tensions have increased in recent months, although in 2022 the frequency of protests did not reach the peak of 2021 (65 reported riots vs. 101 in 2021). In the first four months of 2023, protests have increased 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).

President Sall is expected to expedite the completion of infrastructure projects in the run-up to the presidential election, especially supporting infrastructure projects in the oil and gas industry. Senegal has set an objective of 50% local content for the industry by 2030, a goal complicated by the current shortage of skilled local labor. However, as the sector approaches the commencement of production in late 2023, President Sall is likely to impose increasingly severe adherence to employing local suppliers and subcontractors. 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 the arbitration procedure. The chances of expropriation are typically modest. Commercial dispute resolution is improving as a result of the introduction of a commercial court, but the judiciary remains understaffed and susceptible to political pressure, making contract enforcement more difficult.