Macroeconomic performance: Real GDP growth was an estimated 5.9% in 2018. Growth was attributed to the industrial sector (which grew by 8.7%), dominated by mining (15.3%), but the manufacturing sector grew by 3.2%. The primary sector grew by 3.1%, and the services sector by 5.1%. Growth was bolstered by reforms aimed at improving the busi- ness climate, access to electricity, and investment in the agrofood sector.
The budget deficit increased to an estimated 4.4% of GDP in 2018, from 2.2% in 2017, due largely to loans to finance public investment. Public debt went from 37.4% of GDP in 2017 to 39.0% in 2018, 18% of which is external debt. A debt sustainability analysis released in August 2018 placed the country at a moderate risk of debt distress. Restrictive monetary policy offset the uptick in pump prices for oil products, keeping inflation in check.
Exports of goods increased by an estimated 9.8% in 2018 from 2017. Imports increased more—by 22.7%. The share of exports to Economic Community of West African States countries (0.9% in the first half of 2018) and Europe (1.1%) remained marginal. Some 99% of exports were mining products, 96% of which went to Asia in the first half of 2018, compared with 84% in the first half of 2017. The current account balance reversed from a surplus of 4% of GDP in 2017 to an estimated deficit of 4.9% in 2018.
Tailwinds and headwinds: Real GDP is projected to grow by 6% in 2019 and 2020, underpinned by expansion in services and the extractive subsector, while manufacturing’s contribu- tion remains weak. On the demand side, the return of private investment, particularly in the mining sector, should increase the contribution of capital expenditure to growth.
The private sector is dominated by the informal sector, which accounts for about 95% of jobs in the economy, mainly in agriculture. Investment was an esti- mated 36% of GDP in 2018 after a record 75% in 2017, when investment in the mining sector was 58% of GDP, investment in other private branches was 10%, and investment in the public sector was 7%.
The National Plan for Agricultural Investment and Food Security (2018–2025) aims to reduce the food trade deficit, which reached $686 million in 2017. Ongo- ing reforms include a new land code reducing the time required to transfer land ownership and developing 10 agrofood processing zones throughout the country.
Guinea has exceptional mining potential, including two-thirds of the world’s known bauxite reserves, as well as gold, iron, and diamonds. Although the mining sector produces more than 90% of Guinea’s exports, it accounts for only 17% of tax revenue, 12% of GDP, and 2.6% of employment. With about 20 megaproj- ects planned for the next five years, the mining sector is expected to grow considerably. In response, Guinea will complete by the end of 2019 a strategy paper on the domestic links between mines and other strategic sectors of the economy.
Within the subregion, power grids are being con- structed among seven countries, with Guinea as the energy hub. Guinea could export up to 1,493 gigawatt-hours of electricity by 2022. But Guinea does not yet have paved roads to the three countries it borders—Côte d’Ivoire, Guinea-Bissau, and Liberia —and work under way will take five years to link them to Guinea’s capital, Conakry. Recent laws addressing road maintenance and public–private partnerships for infrastructure will help.
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Economic performance and outlook: Reforms, investment in mines, agriculture, and infrastructure, as well as the end of the Ebola crisis, contributed to an economic upturn in 2016. Real GDP grew 6.6%, reflecting strong performance in agriculture (which grew 5.8%), mining (which grew 33.5%), and energy (which grew 34%). Real GDP growth was an estimated 6.4% in 2017 and is projected to average 6.2% in 2018–19, driven by strong performances in mining, agriculture, and construction.
Macroeconomic evolution: Cautious monetary policy is likely to keep inflation at 8.4% in 2017 and 2018, though it is projected to climb to 10.6% in 2019 due to rising import prices, particularly oil prices. Government policies succeeded in delivering a budget surplus of 0.3% of GDP in 2016. The budget deficit in 2017, estimated at 0.4% of GDP, is projected to deepen to 1.6% in 2018 and 1.8% in 2019 as a result of reforms to expand the scope of the budget and streamline public procurement. The current account deficit is expected to climb from 34.2% of GDP in 2016 to an average of 43% in 2017–19 as a result of imports related to mining projects, energy, and transportation infrastructure. Export income inflows helped widen foreign currency reserves from 1.7 months of import coverage in 2015 to 2.2 months in 2016 and an estimated 2.5 months in 2017–19. Foreign debt remained steady at 21% of GDP in 2016 and is not expected to exceed 50% in 2017–19, despite non-concessional borrowing earmarked to fund infrastructure.
Tailwinds: The country has launched a proactive drive to reform its 2040 Vision for Guinea and its National Economic and Social Development Plan (2016–2020). Links with historic partners have been deepened, and the country is looking for new partners. Spending control has been tightened; non-concessional loans have been sought for infrastructure projects due to better advisement to keep indebtedness at below 50%. Loans are backed by revenues from mining operations, rather than by the value of mining assets. In November 2016, the government secured public and private funding commitments of more than $20 billion under its National Economic and Social Development Plan. The planned investment will be used for both completed and current projects.
Headwinds: In addition to infrastructure shortfalls, the challenges are mainly institutional and are primarily connected with governance, particularly public administration. One of the biggest challenges is how to coordinate decisions to implement visions and policies by governing institutions and how to impose penalties on those who interfere with their execution. Striving for profit, which feeds corruption, hampers the continuous and sustainable implementation of policies and measures. Low civil service salaries, which lag behind the cost of living and private-sector practice, highlight the crucial issue of payroll allocations in public administration reforms. Combined with low budgets for agencies tasked with implementing visions and policies, this situation weakens the country’s ability to develop and implement projects and use resources in a timely manner. Agricultural efficiency, in particular, fails to achieve its potential as a driver of job creation and economic growth.