The West African nation of Guinea shares its northern borders with Guinea-Bissau, Senegal, and Mali, and its southern borders with Sierra Leone, Liberia, and Côte d’Ivoire. Guinea has a population of at least 12.4 million (2016).
Guinea’s President Alpha Condé was re-elected to a second term in office with 57% of the vote in a disputed presidential election in October 2015 and sworn in in December—just before Guinea was declared
The momentum for economic recovery continued with 8.2% growth in 2017 (down from 10.5% in 2016). Increased mining production—particularly bauxite—resumed construction activity, good agricultural performance, and the improved provision of electricity were the main drivers of the recovery.
Guinea’s fiscal imbalances significantly deteriorated, however, in 2017. The fiscal deficit increased to 2.1% of GDP in 2017, from 0.1% the previous year. Compared to 2016, tax revenues were lower as a percent of GDP, while public investment and transfers were higher in the run-up to the 2018 local elections. Mining tax revenues slightly increased to 2.3% of GDP (they had been 2.1% of GDP in 2016) but were significantly lower than expected. Non-mining tax revenues declined to 11% of GDP (11. 9% of GDP in 2016). To cover the shortfall, the government borrowed from the central bank and commercial banks and accumulated domestic arrears of 1.0% of GDP.
Following the conclusion of Guinea’s first ever International Monetary Fund (IMF) program, the IMF approved a new Extended Credit Facility (ECF) in December 2017. The IMF Board completed the First Review of the ECF program on June 25, 2018. The new program accommodates Guinea’s intention to use non-concessional borrowing to finance investment projects in infrastructure, higher education, and water. As such, Guinea has agreed to a $650 million ceiling for non-concessional borrowing for the period 2017–2020.
A World Bank and IMF Debt Sustainability Analysis (DSA)
In September 2017, Guinea announced that China had agreed to loan it $20 billion over almost 20 years in exchange for mineral concessions, mainly bauxite. About $3 billion was to be made available immediately: priority sectors for investment include infrastructure, energy, health, and the environment.
The Guinean economy faces two main risks in 2018: the first is sustaining macroeconomic and fiscal reforms, and the second is ensuring socio-political stability. There is a risk that the legislative election period in 2019 could weaken policy discipline and structural reforms, undermining medium-term growth. There has also been an increase in union-related unrest, particularly in the education sector, as teachers demand higher salaries. On the external front, lower commodity prices and an economic slowdown in China could undermine growth.
Guinea’s potential lies in sectors such as agriculture and natural resources, as well as in the processing of goods and other services. Agriculture is the main source of employment in Guinea and is critical for poverty reduction and rural development. The sector provides income for 57% of rural households and employment for 52% of the workforce. Importantly, it has the potential for further growth.
Natural conditions are favorable for growth. However, to realize this potential and speed the process of structural transformation, the country will first have to improve its overall governance. In addition, Guinea is becoming increasingly vulnerable to climate change with an overall increase in average temperatures; a drop in average annual rainfall, especially in North‐West and North‐East Guinea.
Guinea is also endowed with vast natural resources, especially mining and hydropower resources, which could generate substantial income streams. Its iron ore resources are among the largest and highest quality in the world and include the world’s biggest unexploited iron deposit in Simandou. Guinea also possesses large reserves of bauxite estimated at 7‐8 billion
Last Updated: Nov 16, 2018