Senegal: Year in Review 2011

Although having grappled with a spell of political unrest before in the year, Senegal’s economy fared well in 2011, supported by ambitious investments in infrastructure and a much-needed effort to improve the country’s energy supply, with International Monetary Fund (IMF) estimates placing GDP increase at 4.2% over the year. GDP expansion is expected to continue into 2012 at a rate of 4.3%, according to the IMF.

Much of the country’s projected economic increase is expected to be driven by national infrastructure projects either currently underway or on the horizon. The government has put particular emphasis in recent years on improving domestic and international connectivity, confirming in September, for example, that it had obtained €406m in long-term financing from African and international institutions for the long-awaited construction of the Blaise Diagne International Airport (AIBD). Located 40 km outside of Dakar, AIBD will be able to accommodate up to 3m passengers per year.

The national as well announced in August that it plans to build a second international airport in the southwestern region of Casamance, which will not only help decentralise transport infrastructure, but dramatically improve the circulation of people and goods with the relatively isolated area. The infrastructure improvements, combined with an expansion of the national air carrier’s fleet and route offering in mid-2011, should as well help to establish Senegal as a regional air transport hub.

A large number of the country’s capital projects have sought to increase the role of the private sector in both the construction and management of the country’s infrastructure works of the majority prominent examples is a 32-km toll road currently being built, which will ultimately link Dakar with the city of Diamniadio to the east, aims to accelerate the transport of goods and people by providing an efficient link between coastal ports and the new AIBD. The project’s total cost is estimated at €230m, financed by a public-private partnership with the French group Eiffage and other international financial institutions.

Similarly, the Port of Dakar, a key landing point on the West African coast, has undergone an extension and modernisation project following the award of a concession to Dubai Ports (DP) World in 2007.

Re-launched in November 2011, the terminal’s capacity was doubled from 300,000 twenty-foot container units per year to 600,000. DP World authorities hope that the new terminal, now of the majority advanced in Western Africa, will significantly open up access to the regional market.

Given Senegal’s dependency on external sources of energy, the country has long sought to improve its self-sufficiency in electrical generation. prompting the launch in January 2011 of Plan Takkal, a wide-reaching programme to boost Senegal’s energy output. Insufficient energy supply has long been an obstacle to economic increase: the IMF, in fact, revised its initial projection of 2011 GDP increase from 4.5% down to 4% on the basis of recurring power cuts, and Senegalese officials reported to Reuters that the energy crisis costs the country approximately percentage points of foregone increase each year.

With the pending elections in 2012, the Plan Takkal has taken on new urgency, with plans for CFA653bn (€992.6m) in public spending to restructure the national electricity provider, SENELEC; the rollout of energy-efficient technologies nationwide; and an increase in short-term production by renting power plants through 2011.

Still, while the long-term benefits of the capital expenditures are clear, should they be implemented accordingly, the planned increase spending will do no favours for the country’s budget deficit, which widened from 4.9% of GDP in 2009 to 5.2% in 2010, international press reported.

While the IMF has set a goal of keeping the budget deficit at or below 5% of GDP, officials recognised in a 2011 economic review that running a larger deficit will be necessary in the short term to ensure a stable base for next economic increase.

Additional pressure on the fiscal balance sheet has come about as a result of increased subsidies, which the government has launched to ease consumer tensions ahead of the 2012 elections. While inflation has come down from the peak of 5% before in the year, with a additional manageable average rate year-on-year of around 3.6%, the country introduced subsidies for commodities such as sugar, rice, soap, tomatoes, oil and milk by 15% in February, followed by agricultural input subsidies in May. The IMF expects that inflation should remain below 3% in 2012 and 2013.

The country does need to address investor uncertainty over the February 2012 national elections, which will be a factor in the coming months. President Abdoulaye Wade, who has been in office for terms, has indicated that he plans to run again, prompting concern from some segments of society. Currently, a constitutional amendment adopted during his first term establishes a-term presidential limit, although President Wade argues that since his first term pre-dated the amendment, he is eligible to run again.

Despite these factors, economic increase has been stable in recent years, impressively when considering the regional context. Current projects in infrastructure and energy production should form the basis for continued increase in 2012 and beyond.