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 Côte d’Ivoire in the south. Guinea has a population of 12.6 million, according to World Bank estimates in 2015.
President Alpha Condé was re-elected on October 31, 2015 to a second term in the first round of the country's disputed presidential election, garnering 57% of the votes. He was sworn in on December 14, 2015, less than three weeks before Guinea was declared Ebola free. On December 26, 2015, President Condé appointed Mamady Youla as the country’s prime minister. Youla, a 54-year old economist, has worked both in the private sector and the government. The new 31-strong cabinet has seven women who have key ministerial roles in planning, finance, foreign affairs and agriculture.
The Government of Guinea is preparing a new five-year development plan, for the period 2016-2020. The plan will be the unique development document for engagement with the government and will replace the following documents: the third Poverty Reduction Strategy Paper (PRSP3) for 2013-15, the Quinquennial Plan (2011-15), and the Post-Ebola Recovery Plan (2015-17). The exercise is currently under the leadership of the new Ministry of Planning and International Cooperation.
Guinea is slowly emerging from the twin shocks of Ebola and low commodity prices that adversely affected its economy in 2014 and 2015. After stagnating in 2015, gross domestic product (GDP) growth is projected at 5.2% for 2016 due to an expected increase in bauxite and gold production, and a resilient agricultural sector. Services and manufacturing continue to stagnate in the aftermath of Ebola. The International Monetary Fund’s (IMF) eighth review under the framework of the Extended Credit Facility (ECF) was successfully concluded in September 2016, a first in the country’s history, emphasizing the country’s return to sound economic management.
Guinea’s fiscal situation should improve in 2016 with a projected budget deficit of -1.3% after it deteriorated with an overall deficit estimated at 8.9% of GDP in 2015. The IMF review noted an improvement in revenue inflows, which reached 19.2% of GDP in 2016 compared to 17.2% in 2015. The revenue performance reflected a number of policy measures in 2016 coupled with a reduction in expenditures. That said, pro-poor expenditures were preserved. Current expenditure has been reduced by 2.5 percentage points of GDP compared to the estimated out-turn for 2015 (from 18.4% of GDP in 2015 to 15.6% of GDP in 2016). The inflation rate is expected to be 8.2% in 2016, the same as in 2015.
According to a World Bank and IMF Debt Sustainability Analysis (DSA) from January 2015, Guinea continues to be assessed at a moderate risk of debt distress. Using a higher and unified discount rate of 5% (previously 3%), which was introduced in October 2013, the team found no changes in the underlying conditions. The moderate rating is based on Guinea’s vulnerability to adverse shocks to growth, exports, FDI inflows, fiscal performance, and delays in the implementation of mining projects. The World Bank and IMF teams are working closely with authorities to ensure that all new loans in 2016 and onward are contracted with a high degree of concessionality and a strong development impact.
Poverty affected about 55% of Guinea’s population in 2012, up from 49% in 2003, and is likely to have increased further as a result of the Ebola crisis and economic stagnation in 2014 and 2015. This is particularly true for Macenta and Gueckedou, two areas in the southeast that have been most affected by Ebola and that already had poverty rates above the national average.
A recently conducted mobile phone survey in September 2015, based on interviews with close to 2,500 households across Guinea, confirmed that Ebola had a strong impact on Guinean households. Welfare levels based on asset ownership deteriorated, particularly for rural households, which is consistent with a pronounced income decline by more than 30% for rural households and women in areas severely affected by Ebola. A decline in food consumption was also noted in these same households. In parallel, urban unemployment doubled from 8% in 2012 to 16% in 2015, and close to 10% of households withdrew their children from school, with the large majority citing Ebola as the main factor. Surprisingly, agriculture production remained resilient and food prices were stable.
The poverty headcount rate remains far higher in rural areas (65% in 2012) than in urban centers (35%). A new poverty report updating the trends and profile of poverty in the country is about to be launched.
Despite great success in stopping the spread of the Ebola epidemic, serious challenges remain in addressing the impact of the epidemic. In December 2015, the epidemic had cost the lives of more than 11,300 people in Guinea, Sierra Leone, and Liberia, including more than 500 health care workers. The number of new cases peaked at more than 50 per week in early 2015 before gradually declining as containment efforts took effect.
Furthermore, the Guinean economy will face two main risks at end of 2016 and in 2017. The first challenge is maintaining macroeconomic and fiscal reforms in 2017; and the second challenge is to maintain aid flows to Guinea to offset declining commodity prices and to continue donor support for the post-Ebola recovery plan. In terms of financing, the total estimated cost of this plan over the 2015-2017 period amounts to almost $3 billion, with $857 million for 2015, $1.2 billion for 2016, and $864 million for 2017.
Another particularly difficult challenge for Guinea has been the delay and eventual suspension of the $20 billion Simandou Project in July 2016. This ambitious project, involving Rio Tinto and others, was expected to bring high quality iron ore to the international market, and create 50,000 jobs in Guinea. In July 2016, Rio Tinto management announced a scaling down of its presence in Conakry. Simandou’s suspension sends signals to the international mining community, and will have ripple effects on the Guinean economy.
Last Updated: Nov 08, 2016