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RosjaHydrocarbon production boosts growth
Activity will accelerate sharply in 2025, with a peak in growth that will later stabilise from 2026. It will be mainly driven by the ramping-up of the oil industry (Sangomar oil field, operated by Woodside and Petrosen), of which production exceeded expectations in 2024 (16.9 million barrels of crude vs. an initial objective of 11.7 million) and should reach its full capacity (100,000 bpd) by 2026. Alongside Sangomar, the Grand Tortue Ahmeyim gas project, shared with Mauritania and piloted by BP and Kosmos, also came on stream at the beginning of 2025. The first phase will produce around 2.5 million tonnes of LNG per year, although it will take some time to reach the milestone, and 5 million tonnes in the second phase. Part of the LNG produced will be exported, mainly to Europe, while some should also be used domestically for electricity production. The hydrocarbon industry will stimulate growth by boosting exports, investment and tax revenue, which should then diffuse into the broader economy through multiplier effects and a regulatory framework designed to prioritise infrastructure and social spending when allocating hydrocarbon-generated revenue.
Furthermore, in line with the Senegal 2050 plan’s objectives, investment in agro-industries, energy (such as the gas-fired power plant and pipeline in Saint-Louis), and transport infrastructure (the deep-water port of Ndayane, regional airport modernisation programme, etc.), will continue to support growth. Investment in the gold industry to boost production and explore new deposits will continue, while exports of the precious metal will be supported by historically high prices. Consumption will benefit from a return to political and social stability and low inflation. However, as inflation in WAEMU is expected to remain above the 3% target in 2025 and 2026, the BCEAO (Banque Centrale des Etats de l'Afrique de l'Ouest) is not expected to significantly ease monetary policy (the key rate stood at 3.25% in June 2025). Regarding the shift in US trade policy, the impact on Senegal is expected to be very marginal. The country has a trade deficit with the US, which means that the minimum tariff rate (10% at the time of writing) has been applied. Exports to the US (fish, wigs, synthetic fibres) account for only 0.7% of GDP and around 4% of total exports, while hydrocarbons are exempt from tariffs.
Public finances are a major concern
In the latter part of 2024, an audit of the public accounts revealed that the figures for fiscal deficits and public debt between 2019 and Q1 2024 had been significantly under-reported. According to the findings of the Court of Auditors, this was mainly due to unreported investments (the nature of which is still unclear) that were financed via a combination of external project loans and domestic borrowing (of which the maturity and amortisation timeline is also unclear). Although Senegal is not in a distressed debt situation, its fiscal position is considerably weaker than previously stated, as evidenced by the sovereign rating downgrade by both Moody’s and S&P. The USD 1.83 billion IMF programme (USD 1.51 billion under the EFF and USD 324 million under the RSF) was suspended before its second review. Although the Senegalese authorities have engaged with the IMF to secure a new programme, with an initial target of June 2025, the process is unlikely to respect this schedule as an agreement on the framework must be reached. Without an agreement in due time, Senegal could be forced to look for alternative (and more expensive) sources of funding to meet its debt repayments in 2025-2026, which will be considerable due to the amortisation of its Eurobonds.
The Senegalese authorities have announced substantial fiscal consolidation as they aim to reduce the deficit to 7% of GDP in 2025 and return to 3% of GDP by 2027 (WAEMU convergence criteria). According to the 2025 finance bill, this would mainly be achieved by significantly increasing revenue (by over 20% relative to the revised 2024 budget) by means of increased taxes and reduced tax exemptions. Hydrocarbon revenue for 2025 is estimated at only 1.5% of total revenues and by law has limited uses in the general budget. Expenditure is also expected to increase, albeit more moderately (+3%). While the announced measures on taxation could stabilise the public accounts in the medium to long term, it seems highly unlikely that the announced targets will be reached without a more significant decrease in expenditure. As a result, the deficit is expected to shrink moderately in 2025 and 2026, while public debt will remain very high but on a downward trajectory due to strong GDP growth.
External accounts improve
The current account deficit will shrink in 2025, mainly thanks to an improvement in the trade deficit. Exports will surge thanks to hydrocarbons and gold, while imports should momentarily decrease in line with less requirements of capital goods for the development of the oil industry and softer commodity prices. From 2026 onwards, import growth will accelerate as well due to strong domestic demand (food, refined petroleum products, capital goods for infrastructure projects). Nonetheless, the trade deficit should remain structurally smaller, although export performances will be increasingly tied to oil price trends. The services deficit should continue to improve on back of tourism growth, to which the authorities remain committed, although partly offset by the need for external services to operate the hydrocarbon industry. The primary income deficit (4.3% of GDP) is likely to widen due to repatriation of dividends from the hydrocarbon industry and interest payments on external debt. However, this will be offset by the large secondary income surplus (10% of GDP) that is shored up by expatriate remittances from the diaspora. The current account deficit will continue to be financed by FDI, portfolio investments and loans.
The political and social environment in Senegal has been particularly tense in recent years, marked by successive political crises and social upheavals during the latter part of the presidency of Macky Sall. This culminated in an attempted postponement of the presidential election in February 2024, which was then rejected by the Constitutional Court, which restored the original date of 24 March 2024. Bassirou Diomaye Faye, from the opposition party PASTEF, scored a decisive win in the first round (obtaining 54.3% of the vote) against incumbent Prime Minister Amadou Ba (35.8%) of the APR party led by Macky Sall, and became the youngest president in Senegal’s history. Faye appointed Ousmane Sonko, PASTEF’s leader who was removed as a candidate for the presidential election after multiple legal battles as Prime Minister. However, the new government led with only a small minority in the National Assembly. This prompted Faye to dissolve the Assembly in September 2024 and announce snap parliamentary elections in November 2024, in which PASTEF secured a landslide victory and an absolute majority (130 seats out of 165). This allows President Faye and Prime Minister Sonko the possibility of pushing through their political agenda, of which the main elements are the consolidation of institutions, the strengthening of the judicial system, the fight against corruption and better management of natural resources. Furthermore, considering the current economic environment, as well as Senegal’s fiscal issues, Faye is likely to ease up on implementing more radical economic policies (for instance abandoning the CFA franc, at least for the time being) to sustain investor confidence in the country. It is worth noting that there might be tensions in the relationship between the Senegalese authorities and Woodside regarding the Sangomar operations. For instance, in June 2025, Woodside filed a request for international arbitration with the ICSID due to difficulties in resolving some fiscal matters with Senegal. While the re-examination of hydrocarbon contracts may not be immediately in the cards for the Faye administration, the matter is likely to re-emerge as it is an important point in his political agenda. Last, the handling of the fiscal situation and securing a new agreement with the IMF, without sacrificing too much social spending, will be key for the government, as the Senegalese people and particularly the younger population also have expectations about the improvement of their living conditions.
Senegal maintains close ties with the US and EU countries. France will remain an important economic partner, while military cooperation will change in nature. All French troops are expected to withdraw by the end of 2025, as one of Faye’s commitments was to treat France the same way as all other foreign partners in the name of Senegalese sovereignty. As the security situation in the Sahel has not improved, Islamist groups from Mali on the southeastern border are a lasting concern. Last, Senegal is continuing to diversify its alliances with China, Turkey and the Gulf States, with the aim of attracting new investment.
