Country Report Senegal June 2008

Outlook for 2008-09

• The president, Abdoulaye Wade, is faced with social and political unrest as well as tensions within the ruling Parti democratique senegalais (PDS) over his succession.
• Following the approval by the IMF of a non-financial policy support instrument (PSI), the government will continue to pursue a donor-supported economic reform programme and implement large infrastructure projects.
• The new food price subsidies will cause the fiscal deficit to widen in 2008 to 4.4% of GDP. In 2009, as world food prices drop back and the cost of price subsidies falls, we forecast that the deficit will narrow to 3.9% of GDP.
• Real GDP growth is forecast to rise to 4.8% in 2008 and 4.9% in 2009, driven by stronger growth in phosphate production, construction and services.
• Although the trade deficit is forecast to widen to US$2.7bn in 2008-09, owing to high food and oil prices, the current-account deficit will narrow from 12.4% of GDP in 2008 to 11.5% of GDP in 2009, because of rising real GDP growth.

Monthly review

• Demonstrations organised by the trade unions in May called for a reduction in the price of basic commodities and public-sector pay increases of 15-20%.
• The president has said that the government will not participate in the nationwide consultations, assises nationales, organised by the opposition and civil society groups, which opened in Dakar on June 1st.
• Idrissa Seck, a former prime minister and now a political rival of Mr Wade, has called on the people of Thies, the town of which he is mayor, to resist the government's attempt to abolish it as a separate municipality.
• The government is considering changing the constitution, in order to extend the president's term of office from five to seven years.
• There have been further violent incidents in Casamance: armed men have killed or mutilated villagers, two soldiers were killed when their patrol was attacked by rebel fighters, and 20 people died when a bus hit a landmine.
• The IMF has warned of the possible deterioration of the fiscal position in 2008 owing to price subsidies on food and other unbudgeted spending; cash-flow problems may even affect the payment of public-sector wages.
• High world oil prices are spurring oil exploration activity in Senegal.
• Casamance, once one of Senegal's main destinations for foreign holidaymakers, is struggling to develop its tourism industry, which is being hampered by the uncertain security situation and poor transport links.