Senegal's economy has had stable growth over the years. In the past decade, the country has had one of the highest GDP growth rates in Africa. From 2014 to 2018 the country's GDP growth rate remained above 6% before dropping to 5.3% in 2019 which was an electioneering year. Like many African countries, the service sector is that largest contributor to Senegal's GDP followed by investments and exports.
The spread of the COVID-19 pandemic significantly changed the country's economic prospects for 2020. From March the economy slowed down leading to a GDP decline of about 1.3% in 2020. This was caused by the shutdown of important service sectors such as the transport and tourism sectors. Exports were also hit hard by the pandemic as the global economy ground to a halt. As a developing country, Senegal has many challenges especially with a less developed healthcare system and a large informal sector.
It is expected that the economic recovery will be gradual. This is expected to be driven by investments and a robust informal sector. The government initiated the Senegal Emerging Plan (PSE) to help promote growth in the post-pandemic period. The plan is designed to mobilize private investments into the economy to help revive businesses especially the service sector, agriculture and exports.
The country's biggest challenge is to manage the impact of the COVID-19 on the economy. This is particularly because of the large informal sector. The key is to improve the macro-fiscal resilience and managing both social and environmental risks. This is key to improving human capital. The government is working on plans to boost productivity and enhance the countries competitiveness. The government is also working with investors to increase investment into the economy to create jobs and lower unemployment as the year progresses.
The government has also created the Response and Solidarity Fund of 1,000 billion CFA Franc to combat the COVID-19 impacts. The government also used 250 billion Francs to support households and to invest in the health care system. The government is also investing 300 francs to stimulate the recovery of the private sector.
The Senegalese government has also put in place a number of fiscal policies to help revive the economy. The country is also working with banks and other financial institutions to help business owner's access to affordable loans. This is aimed at helping businesses reopen as the country seeks to normalize its business environment.
While it is too early to measure the actual impact of COVID-19 on the country's economy there are a few indicators that are being monitored. The IMF predicts that the Senegalese economy will grow by 5.5% in 2021. However, this is subject to a number of factors such as the measure the government puts in place to manage the economy in the post-pandemic period. According to the World Bank if the PSE plans are well managed the economy will recover and the business will be able to stabilize reducing poverty levels.
As the COVID-19 pandemic comes to an end with the approval of important vaccines it projected that the Senegalese economies will recover. This recovery is expected to be slow at first considering that the country relies heavily on the service sector and the informal sectors which were hard hit by the pandemics. However, according to the World Bank the government programs put in place will likely lead to economic recovery.