Economic situation A strong role for small businesses
The impacts of Covid-19
Senegal's economy was badly affected 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, although without creating a sufficient number of new jobs. Due to the impacts of the pandemic, growth has slowed considerably to an estimated 1.3 per cent in 2020, with services (such as tourism and transport) and exports most severely affected. Senegal has responded by launching a comprehensive economic stimulus programme (PRES).
The country's economy is dominated by micro and small enterprises, with an estimated 90 per cent of these businesses operating in the informal sector.
The majority of the population works in agriculture or fisheries. However, agricultural productivity is low, generating only around 16 per cent of gross domestic product. This is mainly due to poor soil quality, irregular rainfall, overgrazing and deforestation, all of which are causing progressive desertification.
Climate change is exacerbating the situation
Senegal's climate limits the options for agriculture – two thirds of the country is located in the Sahel zone. Although average annual rainfall is sufficient to sustain productive agriculture, it does not rain regularly enough, with the result that there are frequent droughts, but also heavy rainfall events, which cause devastating floods.
According to scientific forecasts, Senegal must expect an increase in these extreme weather events in future as a result of global climate change. Senegal was therefore one of the first countries in Africa to take out climate risk insurance in order to cope better with the effects of natural events of this kind. In 2019, the country received a pay-out of around 23 million US dollars.
Discovery of oil and gas offers hope
In order to stimulate the economy and reduce poverty, the government has so far focused on large-scale, publicly funded projects in the agriculture, infrastructure, transport and tourism sectors. However, its stated aim is to encourage higher levels of private investment.
One major impediment to development and investment is energy scarcity, combined with the high electricity prices caused by costly oil imports. Several power stations are currently under construction and should come into operation over the next few years. In 2014, large oil and gas deposits were discovered off the coast of Senegal, which have the potential to significantly improve the country's energy supply in the medium term. Oil and gas production was scheduled to commence in 2021 but has been postponed for two years due to the impacts of the COVID-19 pandemic; it is now expected to start in 2023.
As at: 09/08/2022