Senegal: Africa's Economic Giant With 6% GDP Growth - Research Paper

Introduction

The Republic of Senegal, located in West Africa, has a population of about 15.85 million people (Terrell and Jan 10). Almost half of Senegal's population is concentrated around the capital city, Dakar. Since 2014 Senegal has witnessed significant economic growth with around 6% in its GDP, making it one of the most stable countries economically in Africa.

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Current Economic Situation in Senegal

Senegal's current GDP stands at $59.5 billion, translating to a 6.2% annual growth (Terrell and Jan 10). However, Senegal has not completely curbed the unemployment problem as the rate stands at 6.5% of the total population. Also, the inflation rate (CPI) is slightly at 0.5%, with the Foreign Direct Investment inflow at $629.3 million. The country faces a low risk of debt distress, according to the IMF" (Resnick 296).

According to IMF though Senegal's public debt is increasingly growing, Senegal is not distressed on her loans as they are deficient, and she has a GDP rebasing program. Furthermore, with the vast production of oil from offshore, the economy is expected to grow by 2022 (Maertens and Johan 23) steadily. To effectively ensure a predictable, stable growth in the future, Senegal has put forth additional strategies to ensure efficiency in public investment, and secure the macroeconomics framework stability. While the private investment sectors are enormously boosted by the sustainable reforms which work collectively to suppress the investment constraints within the country, the present account deficit remains substantial. This is a result of the high prices of commodities.

It has been a while since Senegal had any financial crisis. Furthermore, the current political regime is stable, hence creating a conducive environment for the economy to thrive. Continuous stable political situation within the country has dramatically maintained the country's good relations with fund donors (Mbaye, Ahmadou, and Stephen 237). Due to reasonable politics, and peaceful transition of power from one leader to another, Senegal has earned her place in the list of the most economically stable countries in Africa, given the fact that politics greatly influences the socio-cultural environment of a country which in turn affects the economy.

Senegal's Exchange Rate Regime

Senegal legal tender of exchange is the Euro. The currency of Senegal is not volatile but overvalued at 2.1%. Moreover, XOF stands as a restricted currency, thus limiting the tradability amount of money. Also, fund transfers in Senegal's currency are only allowed within West African countries. Furthermore, the official currency of both the Communaute Economique et Monetaire de l'Afrique Centrale (CEMAC) and the West African Economic blocks is the CFA franc but with a distinct version of the currency.

Currently, there cannot be an interchange between the two currencies. However, the central banks are working towards integrating the versions to create a single currency, thus allowing for free circulation within the countries. Furthermore, both versions are dependent on Euro. They are consequently rendering the exchange rate at 1 Euro to 655.957 CFA francs.

Senegal's Trade Regime

Senegal's trade regime is mainly anchored on two trading blocs' i.e., Economic Community of West African States (ECOWAS) and the Economic Community of Central African States (ECCAS). Nonetheless, Senegal holds the second position in the WAEMU economy; the exports have substantially increased by 3.3% annually (Sekkat and Aristomene 239). Also, within the last five years, the imports have witnessed an increase of 0.4% annually (Resnick 296). The collective increase in both exports and imports implies that Senegal's consumption and domestic production have equally grown over time.

The US is known as the leading importer and exporter of refined petroleum globally. Thus, Senegal exporting about 13.2% of redefined oil and importing about the same amount stands a better chance of competing for the US (Sekkat and Aristomene 237). However, the most significant disadvantage of competition is that the economy of USA is highly developed, while Senegal's economy is still developing. Consequently, the US holds leverage in benefiting more than Senegal in this sector (Diagne et al., 120)

Senegal has a WTO membership since 1 January 1995; she is also a member of GATT since 27 September 1963 (Ndiaye 185). Senegal's tariff policies are developed as per WTO principles. Moreover, the standard tariffs are made available to ECOWAS members and further exercise preferential tariffs with the EU (Maertens and Johan 23). Although the US is not obliged to two of the two treaties, it is still subjected to the MFN rate.

Based on Senegal's trade map, it is clear that Senegal does not deserve to be one of the biggest trading partners of the US (Terrell and Jan 10). However, the absence of benefits in the tariffs' policies does not necessarily merit that Senegal is not the right trading partner to the US. Furthermore, our company back in the US can significantly benefit from the country's growing economy.

Conclusion

In conclusion, the importation regime of Senegal mainly includes the Sale and distribution of Bananas and further prohibits the importation of shrimp products. Hence, it does not have any direct negative trade issues with the US. Thus, indicating that investing in Senegal is secure for our company. Although the US is not exposed to any benefit of tariff policies, the absence of trade conflict issues between the US and Senegal demonstrates a secure and potential investment destination for our company

Works Cited

Diagne, Abdoulaye, et al. "Senegal." (2013): 119-138.

Maertens, Miet, and Johan FM Swinnen. "Trade, standards, and poverty: Evidence from Senegal." World Development 37.1 (2009): 161-178.

Mbaye, Ahmadou Aly, and Stephen Golub. "Unit labor costs, international competitiveness, and exports: the case of Senegal." Journal of African Economies 11.2 (2002): 219-248.

Ndiaye, Ousmane, and Direction des Plches Maritime. "International fish trade and food security-case of Senegal." Report of the Expert Consultation on International Fish Trade and Food Security: Casablanca, Morocco, 27-30 January 2003 708 (2003): 185.

Resnick, Danielle. "The political economy of food price policy in Senegal." Food Price Policy in an Era of Market Instability, edited by P. Pinstrup-Andersen (2014): 296-318.

Sekkat, Khalid, and Aristomene Varoudakis. "Exchange rate management and manufactured exports in Sub-Saharan Africa." Journal of Development Economics 61.1 (2000): 237-253.

Terrell, Katherine, and Jan Svejnar. The Industrial Labor Market And Economic Performance In Senegal: A Study In Enterprise Ownership, Export Orientation, And Government Regulations. Routledge, 2019.