Macroeconomic performance and outlook
Guinea’s economic growth has remained steady thanks to reforms improving the business environment. Real GDP growth is estimated at 6.2% for 2019 (6.0% in 2018). The tertiary sector’s contribution to growth— improved traffic at the Conakry port, growth of the mobile phone sector, and the opening of new hotel complexes—was 3.6 points in 2018, while those of the primary and secondary sectors were 0.7 points and 1.7 points, respectively.
The tax burden, 13.7% of GDP in 2018, reached an estimated 14.7% in 2019. The budget deficit, 1.5% of GDP in 2018, reached an estimated 2.9% in 2019 and was projected at 2.8% in 2020. By end 2018, the current account deteriorated and registered a deficit of 2.3% of GDP after having recorded a surplus of 4.3% at the end of 2017. Public debt represented 36.7% of GDP at the end of 2018 and should remain below 45% until 2021.
The annual rate of inflation, 9.8% in 2018, reached an estimated 9.7% in 2019. The exchange rate for the Guinean franc, which continues to depreciate, rose from 1,797 to the dollar in 2000 to 9,011 in 2018, due to the low repatriation of export earnings for mining products.
According to the results of a 2014 survey, the 5.2% unemployment rate was coupled with a 12.8% underem- ployment rate. Poverty (at the national poverty line) rose from 41.9% in 2002 to 55.2% in 2012 (last year studied).
Tailwinds and headwinds
Guinea’s economic outlook should allow for an aver- age annual GDP growth of 6% in 2020–21. In addition
to its mineral resources, the country could leverage its significant water resources. It has an estimated 6.2 mil- lion hectares of potential farmland, 75% unused, and 64,000 hectares of irrigable land, of which less than 10% is developed. The country’s hydroelectric poten- tial, less than 6% tapped, is estimated at 6,000MW with guaranteed energy of 19,300GWh a year.
Imports of food processed, most of which can be produced locally, rose to nearly $558 million in 2018. The government plans to reduce its food trade deficit by 50% by 2025 and to create agribusiness processing zones to carry out its development pilot in the Boké and Kankan administrative regions. This pilot will create a body of knowledge to replicate in all 10 of the country’s agropoles.
Despite efforts by the central bank, inflation has con- tinued to increase in the past five years and hovered between 8% and 10% since 2016, mainly due to the increase in food product prices, which represent 37.6% of the food basket. The increase is due to deteriorating roads and bridges, which increase travel times for per- ishable farm products from production to consumption areas. During the rains of August 2019, it could take a week and cost approximately $70 per ton to ship farm products from Nzerekoré to Conakry (864 kilometers), roughly equivalent to the cost of shipping a ton of rice from Bangkok by ship.
High inflation means Guinea faces structural difficul- ties in adhering to ECOWAS convergence criteria. This inflationary trend will not be reversible if road conditions continues to worsen, making local agricultural products more expensive than products imported from Europe and Latin America.
Health sector preparedness
Guinea has quite low capacity to deal with the pandemic. The 2019 Global Health Security Index ranked the country 125 among 195 globally and 22 among 54 in Africa, with a score of 32.7 of 100. Given Guinea’s experience in dealing with the Ebola crisis, it received relatively favorable scores on early detection and reporting for epidemics of potential international concern and on its commitment to improving national capacity, financing plans to address gaps, and adhering to global norms.
The government has started to implement an Emergency Response Plan (Ministry of Health) and an Economic Recovery Plan (Prime Minister’s Office). It has reinforced the health surveillance system and started building new health infrastructure. It has also taken several measures to protect the population, including the distribution of pro- tection kits, cash transfers to 240,000 households, and free water and electricity from April to June 2020. And it has taken measures to protect businesses by reducing the financial and tax burdens for the most affected sec- tors (notably hotels and tourism) and by easing financing conditions.
The government expects massive financial support from development partners to gather enough resources to implement its emergency plans. For the measures to be effective, the government must act rapidly and massively. First, it should protect the population by allocating more resources to the health and social sectors, reinforcing capacities and infrastructure in the health sector, and pro- tecting the most vulnerable households. Second, it should protect businesses affected by the crisis, implementing such measures as tax holidays and relief, subsidies, and guarantees to ease access to credit. Third, the central bank must support the economy by providing liquidity while limiting risks to the financial system—lowering the policy rate and easing reserves and refinancing rules.
In 2019, public debt stood at USD 4,260.10 million, representing 35.7% of GDP (13.7% for domestic debt and 22.0% for external debt). The external debt portfolio is made up of multilateral loans (50%) contracted on concessional terms, bilateral debt (49%) and commercial debt (1%).
The debt strategy is to :
- mobilize resources on the domestic financial market;
- preserve debt sustainability in the medium term and not to exceed a moderate level of external debt;
- gradually repay arrears of domestic debt accumulated in previous years;
- continue efforts to clear longstanding external arrears;
- strengthen the debt management framework
The main domestic financing instruments of Guinea are:
• Treasury Bills (BDT): The Treasury bills used in Guinea have a maturity of 28, 91, 182 and 364 days. They are used to finance cash requirements and part of the budget deficit. At maturity, they are reimbursed for their nominal value. They are kept in current accounts in the books of the Central Bank of the Republic of Guinea (BCRG). Upon issue, they are matched with remuneration deducted from the subscribed value.
• Bond Loans by Public Call for Savings (APE): The authorities have introduced a new financing instrument with a longer maturity than BDTs: bond loans by syndication. This is to finance its priority action plan in the field of Energy and Public Works. Thus, the EPAs were issued in 2015 and in 2017 respectively for a forecast of 400 and 500 billion GNF whose mobilizations were stronger than expected and amounted to 550 billion for the first and 500.346 billion for the second. They are issued for maturities generally of 2, 3, 5, 7 and 10 years. Their reimbursement is generally made by a single payment at maturity.
The mobilization of resources on the domestic financial market involves the continued issuance of Treasury Bills, Public Calls for Savings (APE) and the introduction of new financing instruments such as medium-term Treasury bonds term (3 years). In contrary to treasury bonds which finance short-term cash requirements, the EPAs and Treasury Bonds will be used to finance public investments in the sectors previously identified. Residual needs are met by recourse to concessional or semi-concessional external financing. Indeed, a sufficient mobilization of external resources will be necessary to achieve double-digit growth by 2020 as ambitious by the National Plan for Economic and Social Development. The strategy will be to borrow to meet government funding needs while looking after the associated risks and costs. Priority is given to the mobilization of donations, highly concessional external loans (more than 35% of grant element), semi-concessional.
Regarding the strengthening of the debt management framework, an operational procedures manual has been published and a national debt policy statement has been issued. As for domestic debt management, emphasis will be placed on repayment progressive (over a period of seven years), arrears accumulated in previous years according to well-defined methods while avoiding the accumulation of new arrears in order to support the private sector.For the settlement of long-standing external arrears in In view of their clearance, negotiations will be initiated with creditors not members of the Paris Club and commercial creditors. The objective is to gradually normalize these arrears and avoid the accumulation of new arrears. Caution will be observed in the management of external loans contracted to finance public investments in order to preserve debt sustainability while limiting its vulnerability. The strategy will consist in new loans to maximize the concessional nature and to limit the conclusion of any additional nonconcessional debt compared to the ceiling set in the FEC program.
The Central Bank of the Republic of Guinea does not calculate a yield curve
Guide to Buying Bonds
Procedures for market participation
Direct subscription to Treasury bills and bonds is reserved for primary banks and entities with a settlement account or current account at the Central Bank
The tax on income from movable capital (IRCM) is 10%.
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