major macro economic indicators
|2020||2021||2022 (e)||2023 (p)|
|GDP growth (%)||4.9||4.0||4.6||5.0|
|Inflation (yearly average, %)||10.6||12.5||12.6||12.0|
|Budget balance (% GDP)*||-3.1||-1.7||-1.9||-3.0|
|Current account balance (% GDP)**||-13.7||-1.3||-7.0||-8.0|
|Public debt (% GDP)||47.0||42.0||39.0||37.5|
(e): Estimate (f): Forecast *Grants included **Official transfers included
- Holds one-third of the world's bauxite reserves
- Iron, gold, diamond, uranium and oil deposits still largely untapped
- Significant hydroelectric potential
- Dependence on mining and energy prices
- Dependence on Chinese demand for bauxite
- Low government revenues (13% of GDP)
- Lack of infrastructure, especially in the electricity and transport sectors
- High poverty (44% of the population)
- Difficult business environment
- Structural weakness in agriculture
The mining sector, engine of growth
Although it has accelerated, the growth of the Guinean economy could have been higher in 2022. Disrupting the trend was the war in Ukraine, which generated higher import prices, a slowdown in Chinese demand and political instability, which dented the business environment. However, Guinea's growth is expected to increase again in 2023. This new acceleration will again be due mainly to mining, particularly gold, which accounts for 50% of exports, and bauxite (44%). These mineral exports (60% of GDP in 2021) will be driven by increased production. They contribute to the appreciation of the Guinean currency, which makes it possible to reduce the import bill despite the rise in world food and energy prices, and also to maintain the coverage of imports by foreign exchange reserves, which should represent on average the equivalent of four months of foreign exchange reserves in 2022-2023 (higher than the minimum of three recommended by international bodies). Guinea will continue to benefit from its agreements with Côte d'Ivoire allowing it to import electricity and thus ensure greater stability of supply. Investment in the mining sector will remain the main driver of the economy, with the Simandou iron ore project in particular. This project was halted twice, in March and June 2022, on the orders of the Guinean junta, with the aim of obtaining more favourable job and fiscal conditions for the Guinean economy and a roadmap for the construction of the 650 km-long TGR (Trans-Guinean Railway), which will enable the ore to be transported to the coast without passing through the Liberian port of Monrovia, which is much closer. This has led to the signing of the "Compagnie du TransGuinéen" joint venture agreement between Guinea, the Chinese company "Winning Consortium Simandou" and the Anglo-Australian company "Rio Tinto-Simfer". The joint venture would give the Guinean state a free and non-dilutable 15% stake in the railway and the new deepwater port of Conakry. The agricultural sector, which employs more than 60% of the population, is growing slowly and contributes only 23% to GDP. In this context, although the appreciation of the Guinean franc will contain inflation in imported food and fertilisers, household consumption (63% of GDP) will be expected to grow moderately.
FDI and project loans as the basis for financing
The budget deficit, apart from a slight peak in 2020, is at a very low level. It should, however, cross the 3% threshold in 2023 due, in particular, to the drop in revenue from extractive activities linked to less favourable gold and bauxite prices, and also to security and infrastructure expenditure which will remain high. Public debt is expected to decrease slightly thanks to an acceleration in economic growth. This debt is mainly external (56% of the total), 70% of which is held by China, with the balance held by multilateral organisations.
The current account deficit is expected to widen. In 2021, it was significantly reduced by the trade surplus, which increased considerably due to the collapse of imports linked to a reduction in domestic demand. It rebounded in 2022, missing its previous level, as increased mineral exports partly offset the higher import bill for energy, food and investment goods. In 2023, it will be affected by a widening primary revenue deficit due to increasing profit repatriations by foreign mining companies. The secondary revenue surplus will fall due to the presence of the junta, which will act as a brake on international aid. The trade balance will remain in surplus owing to export earnings from bauxite, diamonds and gold, but will suffer from increased demand for capital goods as construction gains pace. The balance of services deficit is likely to persist due to imports of services needed for mining projects. The current account deficit will be financed by FDI, especially in the mining sector.
Guinea is experiencing a period of great instability following the coup d'état orchestrated on 5 September 2021 by Lieutenant-Colonel Mamady Doumbouya, which put an end to the contested presidency of the autocratic Alpha Condé and resulted in his arrest after 11 years in power. After the junta came to power, numerous demonstrations took place to demand a short transition before the return to civilian rule, such as those of the National Front for the Defence of the Constitution (FNDC), which has amalgamated opposition movements despite its dissolution on 8 August 2022 by the National Committee for Reconciliation and Development (CNRD) representing the military junta. While the population was initially in favour of the coup, it has become very suspicious of the junta and its transitional government, which resorts to violence to repress protests. This has added to the political instability in the business environment and may slow FDI in the mining sector.
In terms of Guinea’s international relations, in spite of the country's fiscal efforts, the IMF's Extended Credit Facility, which expired in December 2020, is unlikely to be renewed until a democratically elected civilian government returns to power. Guinea was suspended from the Economic Community of West African States (ECOWAS) and the African Union in September 2021. ECOWAS could subject Guinea to additional economic sanctions to those decreed on 23 September 2022, including freezing leaders' financial assets and subject them to a "travel ban", as well as suspending all financial assistance and transactions to Guinea by ECOWAS financial institutions. ECOWAS considers the 36-month deadline for the organisation of democratic elections too long. These sanctions would only have a limited effect because of Guinea's low dependence on trade with the regional bloc. Similarly, Guinea's suspension from the US government's African Growth and Opportunity Act (AGOA) will not handicap trade to any great extent. Trade resilience is due in particular to Guinea’s ongoing relations with the United Arab Emirates, India and especially China, in light of the latter's mining interests in Guinea.
Last updated: March 2023