The Country Diagnostic Study (CDS) for Senegal uses the Hausmann-Rodrik-Velasco growth diagnostics model to identify the binding constraints being faced in its quest for higher and more sustained economic growth and make recommendations to relax these constraints. Hence, the findings of the CDS can help the Islamic Development Bank in identifying areas where it can have a greater impact and provide an evidence-basis to support the development of the Member Country Partnership Strategy.
After decades of subdued and highly volatile economic growth due to heavy dependence on primary commodities and low productivity, Senegal experienced an unprecedented growth acceleration from 2014 to 2019. However, there appeared to be a weak correlation between economic growth and jobs creation. In addition, about 90 percent of non-agricultural employment is estimated to be informal. The national poverty rate decreased by 5 percentage points between 2011 and 2018. Nonetheless, the absolute number of poor people has increased. Furthermore, regional disparities are persistent.
Despite the country’s solid performance in the field of governance, further simplification and transparency of business procedures and regulations will be critical in addressing the challenge of informality. Efforts to address informality in the economy should also target the issue of access to finance through the design of financing mechanisms based on specific needs assessment and risk management tools. Senegal will also need to create the conditions for higher competitiveness and follow upgrading trajectories in global and regional value chains. In this respect, both physical and digital connectivity will be essential.