| Recent macroeconomic and financial developments |
| The Guinean economy is one of the most resilient in West Africa. Driven by agriculture and mining, GDP grew an estimated 5.7% in 2023, up from 4% in 2022. Inflation fell from 10.5% in 2022 to 7.8% in 2023. The near stability of the exchange rate against the US dollar has offset imported inflation. |
| The budget deficit rose from 0.8% of GDP in 2022 to 1.6% in 2023, reflecting the impact of electricity and fuel subsidies, but remains one of the lowest in the Economic Community of West African States (eCOWAS). The budget deficit was financed by bond issues. Public debt fell from 40.1% of GDP in 2022 to 35.2% in 2023. The risk of external debt distress is moderate, but the capacity to absorb shocks is limited. The budget deficit and public debt are in line with eCOWAS convergence criteria. The current account deficit remained stable at 8.6% of GDP in both 2022 and 2023, financed by foreign direct investment in the Simandou iron ore mine. Foreign exchange reserves declined from 3.4 of import cover in 2022 to 2.5 months in 2023. The banking sector remains adequately capitalized, but nonperforming loans rose slightly from 8.77% of gross loans in 2022 to 8.95% in 2023. |
| According to the National Institute of Statistics, Guinea’s poverty rate was 43.7% in 2019, down from 55.2% in 2012. The economy is dominated by the informal sector, which in 2023 generated 42% of GDP and 96% of employment (generally not decent jobs). However, GNI per capita rose from $1,010 in 2021 to $1,180 in 2023, moving Guinea from low-income to lower-middle-income status. |
| Outlook and risks |
| GDP growth is projected at 4.2% in 2024, driven by mining production and investment in the Simandou iron ore mine. The growth deceleration from 2023 is attributable to fuel shortages following the oil depot explosion in December 2023 and a reduction in the hydroelectric power supply. Growth is projected to recover to 5.4% in 2025, as electricity supply improves. Inflation is projected to rise above 10% in 2024 and 2025, due to exchange rate depreciation and higher freight costs linked to Russia’s invasion of Ukraine. The budget deficit is projected to widen to under 3% of GDP in 2024 and 2025, due to the resumption of infrastructure investment, higher energy subsidies, and election spending. In 2024 and 2025, imports of capital equipment for Simandou are expected to raise the current account deficit above 2023 levels. The generally favourable outlook could be impaired by sociopolitical tensions and by declining foreign direct investment due to geopolitical tensions. Prudent political management and the signing of a program with the International Monetary Fund (IMF) could mitigate risks. |
| Reform of the global financial architecture |
| Though dominated by low-productivity services, the economy is diversifying toward industry. Industry’s share of GDP rose from 32.1% over 1990–99 to 39.4% over 2010–19, while the share of agriculture, which is undiversified and capital intensive, grew from 19.6% over 2010–19 to 25.6% over 2020–21, with the introduction of improved seeds and fertilizers. These dynamics benefit from investment incentives; greater hydropower supply, which needs to be consolidated; connectivity infrastructure to regional markets; and the import substitution strategy promoted through the National Economic and Social Development Plan 2016–2020 and the Interim Transition Reference Program 2022–2025. |
| The Interim Transition Reference Program has an annual financing gap of $1.125 billion, in addition to the $1.39 billion a year required over 2020–30 for climate resilience. To bridge this gap, Guinea needs to strengthen its macroeconomic framework, improve the business environment, increase domestic resource mobilization, stimulate dormant private financing (stock market, pension funds, green finance), and attract more foreign direct investment. Signing a program with the IMF would also be a helpful signal for mobilizing the approximately $7 billion in financing from the Dubai Round Table on UN Principles for Responsible Investment. In the short term, multilateral development banks should let Guinea benefit from more Special Drawing Rights and partial risk and credit guarantees. In the medium and long terms, graduation to non-concessional windows and financing would be useful. |
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Guinea: Economic Outlook GDP |
