Recent economic developments
- Senegal¡¯s economy increased in 2023, driven by the resilience of the primary sector. Real GDP growth is estimated at 4.3% ¨C 1.5% in per capita terms in 2023 ¨C slightly above the 3.8% growth rate registered in 2022 and above initial projections of 4.1%.
- After reaching a record high of 9.7% in 2022, inflation declined to 5.9%.
- The current account deficit (CAD) improved significantly, increasing international reserves.
- To counter inflation, the Central Bank of West African States (BCEAO) has raised its policy interest rates by a cumulative 150 basis points since mid-2022 to 3.5% for liquidity calls and 5.5% for the marginal lending facility.
Outlook, risks, and challenges
- The outlook remains broadly positive, but it hinges on a solid commitment to macroeconomic stability.
- Overall, domestic, regional, and global uncertainties are high, tilting the risks to the downside.
Spotlight 1: Poverty and equity in a context of multiple crises
- Senegal has coped relatively well in the context of multiple shocks, with the poverty incidence remaining relatively unchanged at 37.5% in 2021/22 from 37.8% in 2018/19 despite the Pandemic.
- Poor Senegalese are still concentrated in rural areas with a relatively high concentration in the groundnut basin.
- The observed decline in consumption per capita was mostly felt by better-off households.
- The average growth rate of the poorest was less negative than that of the better-off, which led to a decline in inequality at the national level and also in urban and rural areas.
Spotlight 2: Options to raise tax revenue from personal Income Tax (PIT)
- Improving domestic revenue mobilization (DRM) is critical for Senegal to achieve its development ambitions.
- Senegal¡¯s tax revenue growth and buoyancy steadily improved over the past decade, surpassing its peers, but revenues remain below their potential.
- The PIT yields little revenue, and its contribution to total tax revenue has stagnated over the past decade due to a narrow tax base and lack of reform momentum.
- Accelerating tax administration and policy reforms on PIT can help boost domestic revenue mobilization efforts.