Population 10.854 million
GDP 5.744 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
|
GDP growth (%)
|
1.9 |
3.9 |
4.8 |
5 |
|
Inflation (yearly average) (%)
|
15.5 |
21.4 |
14.7 |
10.3 |
|
Budget balance (% GDP)
|
-14.4 |
-4.7 |
-9 |
-5.9 |
|
Current account balance* (% GDP)
|
-12.4 |
-16.3 |
-38.8 |
-39.2 |
|
Public debt (% GDP)
|
100.7 |
76.8 |
33 |
32.9 |
| (e) Estimate (f) Forecast | ||||
* grants excluded
STRENGTHS
- Large bauxite reserves
- Deposits of iron, gold, diamonds, uranium and oil still largely unexploited
- Significant hydroelectric potential
- Debt cancellation under HIPC and MDRI initiatives
WEAKNESSES
- Dependence on movements in the prices of mining products, and on energy and food imports
- Infrastructure deficiencies
- Chronic political instability and ethnic conflicts
- Business environment marked by legal insecurity
Risk assessment
Major mining projects driving growth
Growth prospects for 2013 remain favourable. Investments in the mining sector, in particular those in the big Simandou iron ore mining project, are expected to continue, even though international prices, notably of aluminium, are on a slightly downward trend (bauxite and aluminium represent one of the two main exports with gold). Construction is also expected to drive the economy, as work starts on port and transport infrastructure projects, some of which are associated with the Simandou project. Agricultural production, including that of rice, is expected to grow steadily, as part of a reform aimed at making the country self-sufficient in food by 2014. Although it is still insufficient and limits production capacity, notably in the aluminium sector, energy production has recovered thanks to government investments made within the framework of the reform of the electricity sector. Inflation remains high but should continue to decline as a result of prudent budget and monetary policies, measures taken to facilitate the purchase of basic necessities and the increase in rice production.
Marked imbalances but improving
Investments in the mining sector, in particular, have led to an increase in capital goods imports. This, combined with the maintenance of an invisible trade deficit, linked to shipping and insurance costs and repatriation of profits by mining companies, has taken the current account deficit to a very high level. This deficit, however, is expected to have fallen significantly by 2016 due to the growth of mining exports and is expected to continue to be funded until then by a significant inflow of foreign direct investment. Moreover, the country receives financial aid from the IMF through an Extended Credit Facility and has, to date, generally respected the objectives, allowing the release of funds. This opened the way, in September 2012, to debt relief under the HIPC initiative. A month later, the Paris Club creditors even granted additional easing, cancelling almost all their claims. The sums thus saved should make it possible to increase spending in priority sectors (government investments, social spending, spending on poverty reduction). Inherited from the military regime, the government deficit remains substantial but the present authorities are making efforts to improve tax collection and stabilise current spending.
Political situation still weak
Though, economically, the changes are encouraging, the political and security situation remains difficult. The transition to democracy under the authority of President Alpha Condé, elected in November 2010, is stalling. Parliamentary elections have been postponed again and repression of protest movements is hardening. The opposition is still unsuccessfully demanding revision of the composition of the independent national electoral commission, on which it considers itself to be under-represented. Moreover, violent confrontations have occurred at a mine and there has been a long strike in an alumina plant. The authorities are still confronted by the challenges of reconciling ethnic groups, reforming the army and improving population’s living conditions. This situation, in a country which has frequently undergone coups, does not create an environment favourable to the resumption of EU programmes and to investment. Moreover, many major foreign producers in the mining sector, for their own financial reasons and also because of concerns surrounding the revision of contracts, have announced their departure from Guinea. Despite the efforts made, the country’s governance indicators are still weak, in particular with regard to rule of law.
