Think tank sur les politiques publiques dans le secteur agricole et rural en Afrique de l’Ouest

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COVID-19 and its Impact on Senegal’s Macroeconomic Structure

Publié le 19 janvier 2023

The COVID-19 outbreak spread across the globe rapidly causing high mortality and morbidity rates. Moreover, it created a broken economic structure in many countries, especially in developing nations with their fragile macroeconomic environments – Senegal’s gross domestic product (GDP) growth was not spared. As with most sub-Saharan African countries, Senegal faced a fast GDP per capita growth after its independence in 1960. It also experienced multiple economic crises during the period 1970 to 1990 and implemented a series of macro-economic structural adjustments to increase exports and boost GDP growth. This led to the devaluation of the West African CFA1 franc in 1994.

Following the change of currency parity supported by its development partners – the World Bank and International Monetary Fund (IMF) – Senegal held a steady GDP growth before a weakening in economic management between 2005 and 2012. A change of regime allowed the new government to pursue more reliable macroeconomic policies and to implement important infrastructural investment while initiating several reforms aimed at enhancing overall economic governance – developing the business environment and improving the performance of specific
key sectors. This allowed a higher GDP growth average of 6.2% during the period 2014 to 2019. Despite efforts to maintain the positive economic changes in the country, the COVID-19 pandemic caused a drop of six percentage points in GDP growth in 2020.2 Furthermore, the pandemic sunk major economic sectors such as tourism, health, agriculture, banking and transport. To alleviate the impact on the overall economy, local government implemented major fiscal policies in the form of stimulus package funds, as well as direct and indirect tax measures.

On a regional level, the Central Bank of West African States (BCEAO) implemented various monetary policies to create short-term incentives to keep the
CFA zone3 competitive and to ensure that Senegal’s nominal GDP growth rate remained positive.

Given this context, the objective of this paper is to inform a policy response to COVID-19. It will start with an overview of Senegal’s macroeconomic environment from the 1970s until 2019 (the year pre-COVID-19) and outline the major economic reforms implemented during these years to foster economic growth. The paper will also analyse the impact of the fiscal and monetary policies as implemented in response to the pandemic, as well as its effect on Senegal’s economic structure.

About CoMPRA
The COVID-19 Macroeconomic Policy Response in Africa (CoMPRA) project was
developed following a call for rapid response policy research into the COVID-19
pandemic by the IDRC. The project’s overall goal is to inform macroeconomic
policy development in response to the COVID-19 pandemic by low and middleincome
countries (LMICs) and development partners that results in more
inclusive, climate-resilient, effective and gender-responsive measures through
evidence-based research. This will help to mitigate COVID-19’s social and
economic impact, promote recovery from the pandemic in the short term
and position LMICs in the longer term for a more climate-resilient, sustainable
and stable future. The CoMPRA project will focus broadly on African countries
and specifically on six countries (Benin, Senegal, Tanzania, Uganda, Nigeria
and South Africa). SAIIA and CSEA, as the lead implementing partners for this
project, also work with think tank partners in these countries