Senegal's economy experienced growth in 2023, driven by the resilience of the primary sector. Real GDP growth is estimated at 4.3%, translating to 1.5% in per capita terms for the year. This marks a slight increase from the 3.8% growth rate recorded in 2022 and surpasses initial projections of 4.1%. Inflation, which had reached a peak of 9.7% in 2022, declined to 5.9%. Additionally, improvements in the current account deficit have bolstered international reserves.
To combat inflation, the Central Bank of West African States (BCEAO) raised its policy interest rates by a cumulative 150 basis points since mid-2022, setting them at 3.5% for liquidity calls and 5.5% for the marginal lending facility.
The economic outlook remains broadly positive but is contingent on a strong commitment to macroeconomic stability amidst high domestic, regional, and global uncertainties that pose downside risks.
Senegal has managed relatively well despite multiple shocks over recent years, with poverty incidence remaining stable at around 37.5% during 2021/22 compared to 37.8% in 2018/19 despite the pandemic's impact. Poverty continues to be concentrated in rural areas, particularly within the groundnut basin.
Consumption per capita decline was primarily felt by wealthier households rather than poorer ones; as a result, inequality decreased both nationally and within urban and rural areas.
In terms of tax revenue mobilization, Senegal's performance has improved over the past decade but still falls short of its potential. The personal income tax (PIT) yields minimal revenue and its contribution to total tax revenue has stagnated due to a narrow tax base and lack of reform momentum.
Accelerating reforms in tax administration and policy regarding PIT could significantly enhance domestic revenue mobilization efforts necessary for Senegal’s development ambitions.
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