Senegal's economy has been characterized by high growth rates over the past decade, which has been facilitated by political stability in the country. Unlike a number of States in the region, since gaining independence in 1960, power has been transferred exclusively peacefully, which allowed for progressive development without strong shocks. As a result, the poverty level has been significantly reduced, the population's access to electricity has been expanded, and the quality of life has been improved. The main advantages of Senegal include large reserves of natural resources. The country is one of the largest producers of phosphates, which determines the importance of the production of phosphorus fertilizers for the economy. Moreover, the future growth driver is the emergence of the oil and gas sector in the country.
By the end of 2023, it is planned to introduce infrastructure for oil and gas production in the fields discovered in 2014. In addition, the financial sector, tourism and telecommunications services are actively developing in the country. Despite the high potential and ongoing diversification, the Senegalese economy continues to suffer from a number of institutional problems inherent in the countries of the region, including low efficiency of public administration.
In addition, growth is constrained by a high degree of dependence on imports of food products and raw material prices, as well as vulnerability to natural disasters.
The resilience of the Senegalese economy was demonstrated in 2020, when the country managed to avoid a recession amid the spread of COVID-19. Despite the reduction in growth rates due to the extremely negative impact of the pandemic on key sectors of the country's economy, such as tourism, transport and logistics complex and exports, real GDP still showed positive dynamics, increasing by 1.3% due to the anti-crisis measures taken by the government and the support of international organizations. In 2021 indicators of industrial production and activity in the service sector began to recover, which allowed the country's economy to resume growth, the rate of which in 2021 amounted to 6.1%. However, in 2022, the GDP growth rate decreased to 4.7%, which was caused by high food and energy prices.
It is expected that in 2023, the Senegalese economy will once again demonstrate high rates of development. According to the IMF forecast, the country's real GDP indicators will increase by 8.3% in 2023 and by 10.6% in 2024. Oxford Economics assumes more conservative, but still high recovery rates — 6.5% in 2023 and 8.7% in 2024.
The main driver of growth will be the beginning of hydrocarbon production and export. The emergence of its own oil and gas production in the country will allow Senegal to reduce dependence on imports and volatility of energy prices, which will have a positive impact on the dynamics of economic development.
Inflation in 2022 was 9.7%, which is the highest since 1994. The main reason for the sharp increase in inflationary pressure is the rapid increase in food prices, which, according to the World Bank, grew by an average of 15% in 2022. However , by the beginning of 2023 Food inflation has begun to decline, which allows the IMF and Oxford Economics to predict that this year the average annual inflation in the country will decrease to 5% due to the observed decline in commodity prices and tightening of the monetary policy of the Central Bank of West African states. However, achieving the 3% inflation target will be possible only by 2024-2025.
