IMF Visits Senegal to Assess COVID-19 Impacts
End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
The Senegalese economy is expected to contract this year as a result of disruptions in economic activity due to the COVID-19 pandemic. A recovery is underway, but uncertainty regarding its speed and extent remains significant; execution of the revised 2020 budget is proceeding largely in line with expectations, with a robust implementation of the Economic and Social Resilience Program (PRES) to address the COVID-19 pandemic; the authorities and the IMF team made considerable progress on key parameters for the draft 2021 budget, ahead of the second PCI review mission planned for late October 2020.
A staff team from the International Monetary Fund (IMF), led by Ms. Corinne Deléchat, conducted a virtual mission from September 9-18, 2020, to update macroeconomic projections, discuss 2020 budget execution and plans for the 2021 budget. At the conclusion of this mission, Ms. Deléchat issued the following statement:
“The Senegalese economy has been severely hit by the COVID-19 pandemic, with real GDP growth now expected to contract by 0.7 percent this year, reflecting the larger-than-anticipated disruptions in economic activity stemming from the pandemic and strict containment measures. A gradual recovery started in May with the lifting of most COVID-19-related restrictions, followed by the reopening of borders in July. Senegal’s strong health response is showing encouraging signs with a steady decline in new COVID-19 cases and hospitalizations over the past four weeks. In 2021, output is projected to rebound back to above 5 percent, boosted in part by favorable prospects for agriculture. This projection is however subject to significant downside risks, reflecting uncertainties around the speed of the global recovery and the evolution of the pandemic, which could continue to affect important sectors of the economy such as tourism, transport and hospitality.
“Budget execution through end-August 2020 was broadly satisfactory, and the objectives for the remainder of the year set in the revised 2020 budget remain within reach. Uncertainties related to the mobilization of programmed resources however remain. Therefore, the mission encourages the authorities to continue with their prudent approach in order to maintain the deficit at around 6 percent of GDP as envisaged in the 2020 revised budget. The mission commends the authorities for the strong and transparent implementation of their Economic and Social Resilience Program (PRES). Most of the planned COVID-19 measures have already been executed, as detailed in the June 2020 quarterly budget implementation report. The mission welcomes the recent repeal of the decree on derogatory procurement procedures for COVID-19 related spending, which will from now on follow the normal procurement procedure. The authorities have also finalized a new recovery plan which aims to support a return to strong and inclusive private sector-led growth, focusing on accelerating the structural transformation process and enhancing the economy’s resilience through diversification of the productive base.
“The mission and the authorities made significant inroads in discussing the contours of the draft 2021 budget. Given high uncertainty and lingering effects of the pandemic on some sectors of the economy, the draft 2021 budget should aim to strike a balance between supporting the recovery, including through a robust investment plan on the one hand, and fiscal and debt sustainability also consistent with the WAEMU’s external stability on the other. To that effect, the 2021 fiscal stance should continue to signal a strong commitment to return gradually to a budget deficit of 3 percent of GDP by 2022, in line with the WAEMU convergence criterion, as the situation normalizes. Discussion on the draft budget will continue in the coming weeks.
“The second PCI review mission will take place in late October 2020, with a Board meeting tentatively planned for December 2020.
“The mission wishes to thank the authorities for the frank, open and constructive dialogue.”
Oil Posts 2% Gain for the Week Despite India Virus Surge
Oil prices steadied on Friday and were set for a weekly gain against the backdrop of optimism over a global economic recovery, though the COVID-19 crisis in India capped prices.
Brent crude futures settled 0.28% higher at $68.28 per barrel and U.S. West Texas Intermediate (WTI) crude advanced 0.29% to $64.90 per barrel.
Both Brent and WTI are on track for second consecutive weekly gains as easing restrictions on movement in the United States and Europe, recovering factory operations and coronavirus vaccinations pave the way for a revival in fuel demand.
In China, data showed export growth accelerated unexpectedly in April while a private survey pointed to strong expansion in service sector activity.
However, crude imports by the world’s biggest buyer fell 0.2% in April from a year earlier to 40.36 million tonnes, or 9.82 million barrels per day (bpd), the lowest since December.
In the United States, the world’s largest oil consumer, jobless claims have dropped, signalling the labour market recovery has entered a new phase as the economy recovers.
The recovery in oil demand, however, has been uneven as surging COVID-19 cases in India reduce fuel consumption in the world’s third-largest oil importer and consumer.
“Brent came within a whisker of breaking past $70 a barrel this week but failed at the final hurdle as demand uncertainty dragged on prices,” said Stephen Brennock at oil brokerage PVM.
The resurgence of COVID-19 in countries such as India, Japan and Thailand is hindering gasoline demand recovery, energy consultancy FGE said in a client note, though some of the lost demand has been offset by countries such as China, where recent Labour Day holiday travel surpassed 2019 levels.
“Gasoline demand in the U.S. and parts of Europe is faring relatively well,” FGE said.
“Further out, we could see demand pick up as lockdowns are eased and pent-up demand is released during the summer driving season.”
Lagos Commodities and Futures Exchange to Commence Gold Trading
With the admission of Dukia Gold’s diversified financial instruments backed by gold as the underlying asset, Lagos Commodities and Futures Exchange is set to commence gold trading.
According to Dukia Gold, the instruments will be in form of exchange-traded notes, commercial papers and other gold-backed securities, adding that it will enable the company to deepen the commodities market in Nigeria, increase capacity, generate foreign exchange for the Nigerian government to better diversify foreign reserves and create jobs across the metal production value chain.
Tunde Fagbemi, the Chairman, Dukia Gold, disclosed this while addressing journalists at Pre-Listing Media Interactive Session in Lagos on Thursday.
He said, “We are proud to be the first gold company whose products would be listed on the Lagos Futures and Commodities Exchange. The listing shall enable us facilitate our infrastructure development, expand capacity and create fungible products.
“This has potential to shore up Nigeria’s foreign reserve and create an alternative window for preservation of pension funds. A gold-backed security is a hedge against inflation and convenient preservation of capital.”
“As a global player, we comply with the practices and procedures of London Bullion Market Association and many other international bodies. Our refinery will also have multiplier effects on the development of rural areas anywhere it is located,” he added.
Mr Olusegun Akanji, the Divisional Head, Strategy and Business Solutions, Heritage Bank, said the lender had created a buying centre for verification of quality and quantity of gold and reference price to ensure price discovery in line with the global standard.
Oil Nears $70 as Easing Western Lockdowns Boost Summer Demand Outlook
Oil prices rose for a third day on Wednesday as easing of lockdowns in the United States and parts of Europe heralded a boost in fuel demand in summer season and offset concerns about the rise of COVID-19 infections in India and Japan.
Brent crude rose 93 cents, or 1.4%, to $69.81 a barrel at 1008 GMT. U.S. West Texas Intermediate (WTI) crude rose 85 cents, or 1.3%, to $66.54 a barrel.
Both contracts hit the highest level since mid-March in intra-day trade.
“A return to $70 oil is edging closer to becoming reality,” said Stephen Brennock of oil broker PVM.
“The jump in oil prices came amid expectations of strong demand as western economies reopen. Indeed, anticipation of a pick-up in fuel and energy usage in the United States and Europe over the summer months is running high,” he said.
Crude prices were also supported by a large fall in U.S. inventories.
The American Petroleum Institute (API) industry group reported crude stockpiles fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters. Gasoline stockpiles fell by 5.3 million barrels.
Traders are awaiting data from the U.S. Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large fall.
“If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January,” Commonwealth Bank analyst Vivek Dhar said in a note.
The rise in oil prices to nearly two-month highs has been supported by COVID-19 vaccine rollouts in the United States and Europe.
Euro zone business activity accelerated last month as the bloc’s dominant services industry shrugged off renewed lockdowns and returned to growth.
“The partial lifting of mobility restrictions, the expectation that tourism will return in the near future, and the lure of the psychologically important $70 mark are all likely to have contributed to the price rise,” Commerzbank analyst Eugen Weinberg said.
This has offset a drop in fuel demand in India, the world’s third-largest oil consumer, which is battling a surge in COVID-19 infections.
“However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment,” ING Economics analysts said of the situation in India.
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