Overview

Country Overview

The West African nation of Guinea spans an area of 245,860 kilometers and shares borders with Guinea-Bissau, Senegal, and Mali in the north, and with Sierra Leone, Liberia, and Cote d’Ivoire in the south. According to an April 2014 population census, Guinea has a population of 10.63 million, with women making up more than half of the population.

Political Context

The November 2010 presidential election marked Guinea’s return to constitutional order after the army seized power in December 2008. After a difficult period of military transition, the election of the first democratically elected president, Alpha Condé, and a new political context, paved the way for new economic opportunities in Guinea. Several reforms were introduced and Guinea reached the completion point for the Heavily Indebted Poor Countries (HIPC) Initiative in September 2012. Legislative elections took place in September 2013, and official results were approved by the Supreme Court in November 2013 in spite of allegations of fraud declared by both the opponents and the ruling regime. The political transition will be completed through the organization of local elections which have been postponed several times due to a lack of consensus among the political players.  The next presidential elections are scheduled for October 11, 2015.

Economic Overview

Guinea’s medium-term potential remains encouraging; however growth is projected to remain well below the levels initially anticipated before the Ebola outbreak for the coming years. In 2013-14, real GDP growth rates were projected around 5%, accelerating sharply to close to 20% in 2015-16 following the start of the major Simandou iron ore project. However, as a result of the drop in mining investment and political unrest, growth dropped to a level slightly negative in per capita terms in 2013. As a result of the Ebola epidemic, growth is estimated at only about 1% in 2014 and could be close to nil in 2015; inflation remains within the single digits. Economic activity could resume rapidly once Guinea is declared Ebola-free, provided the elections are completed quickly and political stability is maintained. That said, annual growth will likely not exceed 4 to 5% in FY16-17.

A January 2015 debt sustainability analysis shows that the external debt/GDP ratio went up from 22% in 2013 to 26% in 2014 and is projected to further increase to 31% in 2015 due to low growth and increased short-term borrowing. The country is still at a moderate rate of debt distress, but it is important to monitor new borrowing carefully and to ensure that any non-concessional borrowing has a high grant element and large projected returns. Domestic debt should, at 14% of GDP, be closely monitored.

Social Context

With elusive and volatile growth, the poverty rate increased from 53% in 2007 to 55% in 2012. Declining average per capita consumption contributed to the increase in poverty, but a mild reduction of inequality, notably in rural areas, somewhat contained the overall increase in poverty. Rural – urban migrations, and the sharp increase in food prices explain why rural areas fared better than urban areas in terms of poverty reduction, even if poverty rates remain higher in rural areas (65% of the population in 2012) than in urban areas (35% of the population in 2012). Meanwhile, extreme poverty (the inability to satisfy basic food needs) increased from 12% to 18% between 2007 and 2012. The most important determinants of poverty are location, gender, and education of the head of household. Guinea ranked 179th out of 187 countries on the United Nations Human Development Index (HDI).

Development Challenges

Guinea has undergone several shocks over the past two years; the most devastating being that of the Ebola epidemic which began in early 2014.  In 2013, investment in the mining sector came to an abrupt halt due to delays in completing the legal framework for the major Simandou iron ore project and a sharp negative turn in the medium-term outlook for international mineral prices. The Ebola epidemic has already cost close to 2,500[1] lives in Guinea and has had a devastating effect on the economy. The declining rate of new infections since the end of 2014 shows promise that the epidemic can be stopped in 2015 but it will take considerable time and effort to redress the damage contain the risks of future flare-ups.

Bringing the Ebola epidemic under control, preventing its reoccurrence, and addressing its social and economic impact has become a new and urgent development issue for Guinea. To this end, the Government of Guinea has prepared a Post-Ebola Priority Actions Plan (Plan d'Actions Prioritaires Post-Ebola—PAPP) for the period 2015-2017. The PAPP is based on the 2013-15 Poverty Reduction Strategy, maintaining its main focus areas and policies, but emphasizes measures to bring the Ebola epidemic under control, to prevent similar outbreaks in the future, and to address the immediate social and economic needs of those most affected by the epidemic. In addition to new budget support and other assistance to help the country address the impact of the epidemic, the World Bank Group has supported the government with the preparation of the recovery strategy.

Last Updated: Jun 09, 2015

World Bank Group Engagement in Guinea

The Bank Group’s engagement builds on an Interim Strategy Note prepared in 2008 and a Country Assistance Strategy (CAS) which expired in 2006 in a context of a deteriorating political and social climate.  During the previous CAS period, the economic landscape of Guinea worsened, economic growth slowed and the incidence of poverty grew from 49% in 2003 to 53% in 2007. A military coup in 2008 led to a suspension of Bank operations for nearly three years. The combined effects of regional insecurity, low international prices for Guinea’s main commodities, and political and social turbulence catapulted Guinea into a state of fragility comparable to that of post-conflict countries. While continued political instability was the main obstacle to growth, other issues also contributed.  The absence of infrastructure investment isolated large segments of the population, contributing to gender inequality as traditional cultural practices became more entrenched. In addition, an extremely difficult business climate prevented the development of a competitive private sector. The expansion of the mining sector also possibly led elites to compete for rents, rather than develop the economy and institutions, thus further fueling instability.

The Board of the World Bank Group (WBG) discussed the FY14-17 Country Partnership Strategy (CPS) for Guinea in October 2013. The CPS supports Guinea’s Third National Poverty Reduction Strategy Paper (PRSP3) that was approved by the Government of Guinea in May 2013, and focuses on: (i) improving governance; (ii) stimulating growth and economic diversification; and (iii) supporting human development. The WBG is currently preparing a mid-term Performance and Learning Review (PLR) of the CPS which purpose is: (i) to inform the WBG Board of Executive Directors, the government and other stakeholders on progress so far with reaching the strategy’s objectives; and (ii) to draw lessons and highlight changes to the CPS to ensure that it remains relevant and effective. The PLR is based on portfolio reviews and discussions held with the Government of Guinea and other stakeholders in March-April 2015.

Last Updated: Jun 09, 2015

The national IDA portfolio consists of 10 approved operations for a total of $250 million and 6 knowledge products in implementation. The disbursement ratio stands at 25% as of May 2015.  The regional portfolio is comprised of 7 projects, or $217.5 million in commitments.  The Bank Group’s program is contributing to putting in place potentially transformative building blocks in the priority sectors of energy, agriculture, mineral sector governance, and regional integration in Guinea.  The portfolio grew substantially because of additional support related to the Ebola epidemic.

Emergency Response to the Ebola Virus Outbreak

The WHO formally announced that an Ebola epidemic existed in Guinea in March 2014. By mid-2014, the epidemic had spread to Liberia and Sierra-Leone; following a surge toward the end of the year.  New cases gradually decreased in the first months of 2015. Liberia was declared Ebola-free on May 9, 2015 but Guinea still continues to incur new cases. In addition to weak health systems, combatting the disease is complicated by cultural habits and mistrust of central authorities.

Disruptions in international trade and travel and in domestic production and investment have had a very serious economic impact. Frequent market closures resulted in crop losses and reduced activity in the rural areas and private sector companies closed and unemployment rose. The health system has been further weakened as many health facilities are no longer operational due to the desertion of personnel, avoidance by the population, and disruption in basic supplies. The impact of this on other social sectors continues to grow and there is a particular need to provide support for a growing number of orphans. The start of the 2014-15 school year was delayed by four months.

Following a slow start, the international community provided substantial assistance to Guinea in combatting the epidemic. The World Bank has provided a total $153 million to the Ebola response in Guinea, including $50 million in budget support. 

Last Updated: Jun 09, 2015

Following the democratic elections of 2010, the international donor community converged to support the newly elected Government of Guinea.  In addition to the Bretton Woods institutions, the main development partners contributing substantially in financial support to the country are the African Development Bank, the European Commission, the Islamic Development Bank, and Agence Française de Développement. However, on specific issues, other institutions and partners are crucial. The United Nations (UN) coordinates interventions in the area of security reform, with contributions from bilateral aid, as well as from ECOWAS and the African Union. USAID plays a crucial role in establishing democratic institutions, complementing the work of the European Union (EU). The EU has led the work on support for the justice sector. Non-traditional development partners, including Arab countries, China, Brazil, Russia and India, have focused on areas closely linked to Guinea’s comparative advantage such as mining and agriculture, or where public private partnerships could yield a rapid transfer to purely private activities. 

 

Last Updated: Jun 09, 2015


LENDING

Guinea: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments