The port of Dakar, Senegal

Economic situation Strong role of small-scale enterprises

The most important sectors of Senegal's economy are agriculture, construction, fisheries and services. The capital, Dakar, is a hub for trade in West Africa.

The impacts of COVID-19

Senegal's economy has been hit hard by the COVID-19 pandemic. From 2014 to 2018, the country achieved economic growth of more than six per cent per annum, one of the highest rates in Africa. In 2019, its economy grew by 5.3 per cent – without, however, generating a sufficient number of new jobs. Because of the impact of the pandemic, growth slowed to an estimated 1.3 per cent in 2020 – a significant downturn – with services (such as tourism and transport) and exports most severely affected. Senegal has responded by adopting a wide-ranging economic stimulus programme called PRES.

The country's economy is dominated by micro and small enterprises, of which 90 per cent are estimated to belong to the informal sector.

The majority of the population works in agriculture or fisheries. However, agricultural productivity is low. The farming sector only accounts for about 16 per cent of gross domestic product. The main causes of this are poor soil quality and irregular rainfall along with overgrazing and deforestation, all of which are leading to increasing desertification.

Climate change is exacerbating the situation

Senegal's climate limits the options for agriculture – two thirds of the country is in the Sahel zone. Although the mean annual rainfall would be sufficient to sustain productive agriculture, it does not rain regularly enough, meaning that there are recurrent periods of drought as well as incidents of severe rainfall with devastating floods.

According to scientific forecasts, Senegal must expect an increase in such extreme weather events in the future as a result of global climate change. Senegal thus became one the first countries in Africa to take out climate risk insurance in order to better cope with the effects of natural events of this kind. In 2019, the country received a pay-out of some 23 million US dollars.

Discovery of oil and gas reserves gives rise to hope

In order to boost economic development and reduce poverty, the government has so far focused on publicly funded large-scale projects in the areas of agriculture, infrastructure, transport and tourism. However, it is the declared goal of the government to encourage higher levels of private investment.

One major impediment for development and investment is the scarcity of electricity. Several power stations are being built which should go on stream in the next few years. In 2014, large oil and gas reserves were discovered off the coast of Senegal, which could significantly improve the country's energy supply in the medium term. The extraction of these oil and gas reserves was to start in 2021 but has been postponed for two years because of the effects of the COVID-19 pandemic.