APA-Dakar (Senegal) – Dakar must adopt new budgetary rules to cope with the tightening of international financial conditions, says the World Bank in its 2023 report on the country’s economic situation.
By Abdourahmane Diallo
In 2022, Senegal’s real GDP growth slowed to 4.2%, after a strong recovery to 6.5% in 2021 following the Covid-19. This is due to a fall in private investment and exports, as well as a contraction in the agricultural sector and industrial production, the World Bank explains in its 2023 Economic Outlook for the country, published on Wednesday.
The international monetary institution also noted that strong inflationary pressures, with a significant impact on low-income households, have led to shock absorbers. These, combined with borrowing by state-owned enterprises – mainly to finance investments in the oil and gas sector – have led to an increase in public debt in 2022, the WB adds.
Based on this observation, Hélène Aminatou Ba, World Bank country economist and co-author of the report, holds that “fiscal consolidation is a priority for Senegal, given the tightening of financial conditions in regional and international markets. (This is because) it would allow a gradual reduction in the high debt to GDP ratio after 2023”.
According to Ms Ba, “the overall risk of debt distress remains moderate, but it is important to have room for manoeuvre to deal with adverse economic conditions.”
The WB report also notes that the macroeconomic outlook, while subject to considerable volatility, is favourable. This should lead to a rebound in growth to 9.9% in 2024, driven by strong industrial production marked by the start of hydrocarbon exploitation.
“The country’s growth remains resilient despite the multiple crises, and the macroeconomic outlook is favourable. However, this growth needs to be more inclusive in the face of inflation, which has exacerbated poverty in 2022,” says Keiko Miwa, the bank’s director of operations for Cabo Verde, Gambia, Guinea-Bissau, Mauritania and Senegal, as quoted in the report.
In March last year, the International Monetary Fund said the West African country’s economy should grow by 8.3% in 2023 thanks to a temporary increase in oil and gas production.
“If oil production starts at the end of the year as planned, GDP growth is estimated at around 8%, but if it is postponed until next year, growth is forecast at 5% or 5.3%,” says IMF mission chief Edward Gemayel at the end of a visit to Dakar.
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