IMF Executive Board Concludes the 2021 Article IV Consultation with Guinea

IMF News, June 30, 2021

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IMF Executive Board Concludes the 2021 Article IV Consultation with Guinea

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Bibliographic details

• Published: June 30, 2021

Economic performance and macro outcomes (2020–2021)

• Real GDP growth: 7.1 percent of GDP in 2020.
• Sectoral growth:
  • Mining: 34.6 percent (2020).
  • Non-mining: 1.3 percent (2020); noted as significantly affected by the Covid-19 pandemic and employing the vast majority of the population.
• Inflation:
  • Surpassed 10 percent at end-2020.
  • Accelerated to above 12 percent (by June 2021).
  • GDP deflator: 10.7 (2020); projected 11.3 (2021).
  • Consumer prices (average): 10.6 (2020); projected 11.6 (2021).
• Current account and reserves:
  • Current account deficit increased to 13.7 percent of GDP (2020).
  • Reserves reached USD 1.3 bn at end-2020.
• Public debt and fiscal outcomes:
  • Fiscal deficit reached close to 3 percent of GDP (2020).
  • Public debt increased to 43.4 percent (2020), reflecting the first disbursement for the Souapiti dam project and crisis response spending.
• Monetary and credit conditions:
  • Monetary policy described as accommodative; accommodative regulatory measures helped sustain credit supply.
  • Net foreign assets: 8.6 (2020).
  • Net domestic assets: 15.3 (2020).
  • Reserve money: 19.2 (2020).
  • Broad money (M2): 23.0 (2020).
  • Credit to non-government sector: 4.7 (2020).

Health shocks, social impact, and policy response

• Health shocks:
  • COVID-19 pandemic significantly affected the non-mining economy.
  • New Ebola outbreak in February 2021 (localized); authorities and WHO declared the end of the Ebola outbreak on June 19, 2021.
• Policy responses:
  • Authorities implemented a crisis response plan to expand health spending and support vulnerable households and the private sector.
  • Vaccination campaigns for COVID-19 and Ebola started in March 2021.
  • Donor support contributed to reserve accumulation.

Outlook and risks (projections and scenario drivers)

• Growth projection: Real growth projected at 5.2 percent in 2021, supported by robust mining-sector growth and gradual recovery of the non-mining sector.
• Inflation outlook: Likely to remain above the BCRG's single digit target throughout 2021.
• Key downside risks:
  • Potential intensification of the COVID-19 pandemic.
  • Commodity price shocks.
  • Reduced availability of donor financing.
  • Increased geopolitical tensions.
  • Vulnerability to climate change.
• Key upside possibilities:
  • Faster-than-expected increase in mining activity.
  • Accelerated implementation of investment activities, particularly the Simandou iron ore project.

Executive Board assessment and policy recommendations

• General view:
  • Directors commended prompt response to COVID‑19, welcomed resilient growth in 2020, and noted a favorable near‑term outlook subject to downside risks.
  • Emphasized vaccination implementation and maintaining targeted support for vulnerable households and businesses.
  • Stressed need to diversify the economy and secure more inclusive, balanced, and sustainable growth.
• Fiscal and revenue policy:
  • Encourage continued efforts to create fiscal space for investment in infrastructure, human capital, and social protection.
  • Highlighted urgency of domestic revenue mobilization, particularly from the mining sector.
  • Specific recommendations on mining revenue:
  • Address profit shifting risks from transfer mispricing.
  • Fully apply the Mining Code to new contracts.
  • Minimize tax exemptions.
  • Adopt the General Tax Code.
  • Enhance spending efficiency and eliminate energy subsidies.
  • Continue strengthening public financial management.
  • Maintain prudent external borrowing policies; maximize recourse to concessional financing and grants to safeguard debt sustainability.
• Monetary and exchange rate policy:
  • Address rising inflation, including by accelerating repayment of central bank advances.
  • Limit monetary financing of the budget.
  • Continue modernizing the monetary policy framework, focusing on more active liquidity management and clearer communication of monetary targets.
  • Exchange rate flexibility recommended to help build reserves and absorb shocks; welcomed transparent rules‑based foreign exchange intervention policy.
• Structural reforms and governance:
  • Encourage diversification efforts: strengthen business climate and financial sector, promote digitalization, and boost human capital development.
  • Welcome recent improvements in governance; encourage strengthening the anti‑corruption framework, including swift adoption and implementation of the national strategy and the asset declaration regime.

Selected economic and financial indicators (2019–22)

• GDP at constant prices (annual percentage change): 5.6 (2019); 7.1 (2020); 5.2 (2021 proj.); 6.1 (2022 proj.).
• Mining (annual percentage change): 9.4 (2019); 34.6 (2020); 7.7 (2021 proj.).
• Non-mining (annual percentage change): 4.9 (2019); 1.3 (2020); 4.5 (2021 proj.); 5.8 (2022 proj.).
• GDP deflator: 9.9 (2019); 10.7 (2020); 11.3 (2021 proj.); 9.7 (2022 proj.).
• GDP at market prices (annual percentage change): 16.2 (2019); 18.6 (2020); 17.0 (2021 proj.); 16.4 (2022 proj.).
• Consumer prices (average): 9.5 (2019); 10.6 (2020); 11.6 (2021 proj.).
• Exports, f.o.b. (US$ terms, annual percentage change): -0.8 (2019); 126.4 (2020); 0.6 (2021 proj.); -9.8 (2022 proj.).
• Imports, f.o.b. (US$ terms, annual percentage change): -21.1 (2019); 76.0 (2020); -4.7 (2021 proj.); -16.4 (2022 proj.).
• Net foreign assets (percent of broad money stock): 10.5 (2019); 8.6 (2020); 7.9 (2021 proj.); 10.8 (2022 proj.).
• Net domestic assets (percent of broad money stock): 12.4 (2019); 15.3 (2020); 5.1 (2021 proj.); 7.0 (2022 proj.).
• Reserve money (annual percentage change): 16.6 (2019); 19.2 (2020); 12.2 (2021 proj.); 13.4 (2022 proj.).
• Broad money (M2) (annual percentage change): 22.9 (2019); 23.0 (2020); 13.7 (2021 proj.); 17.8 (2022 proj.).
• Central government finances (percent of GDP):
  • Total revenue and grants: 14.4 (2019); 12.8 (2020); 14.9 (2021 proj.); 14.7 (2022 proj.).
  • Revenue: 13.9 (2019); 11.8 (2020); 13.2 (2021 proj.); 14.1 (2022 proj.).
  • Non-mining revenue: 12.0 (2019); 10.2 (2020); 11.5 (2021 proj.).
  • Grants: 0.5 (2019); 1.0 (2020); 1.7 (2021 proj.).
  • Total expenditure and net lending: 15.7 (2019); 17.1 (2020); 17.6 (2021 proj.).
  • Current expenditure: 11.1 (2019).
  • Interest payments (of current expenditure): 0.7 (2019); 0.9 (2020).
  • Capital expenditure and net lending: 3.7 (2019).
  • Overall budget balance including grants: -0.5 (2019); -2.9 (2020); -2.2 (2021 proj.).
  • Overall budget balance excluding grants: -1.0 (2019); -3.9 (2020); -3.4 (2021 proj.).
  • Basic fiscal balance: -1.4 (2019); -0.1 (2020).
• Current account balance including official transfers (percent of GDP): -10.8 (2019); -13.7 (2020); -9.3 (2021 proj.); -11.6 (2022 proj.).
• Exports, goods and services (US$ millions): 4,130.8 (2019); 8,996.0 (2020); 9,012.6 (2021 proj.); 8,134.6 (2022 proj.).
• Imports, goods and services (US$ millions): 5,026.9 (2019); 9,938.4 (2020); 8,888.8 (2021 proj.); 7,679.6 (2022 proj.).
• Overall balance of payments (US$ millions): 257.8 (2019); -131.0 (2020); 100.7 (2021 proj.); 204.8 (2022 proj.).
• Net foreign assets of the central bank (US$ millions): 843.3 (2019); 948.5 (2020); 1,273.9 (2021 proj.); 1,645.1 (2022 proj.).
• Gross available reserves (months of imports)²: 2.1 (2019); 2.2 (2020); 2.5 (2021 proj.).
• External public debt, incl. IMF (percent of GDP): 19.9 (2019); 25.8 (2020); 28.6 (2021 proj.); 30.9 (2022 proj.).
• Total public debt, incl. IMF (percent of GDP): 38.0 (2019); 43.4 (2020); 43.3 (2021 proj.); 42.9 (2022 proj.).
• Nominal GDP (GNF billions): 124,109 (2019); 147,188 (2020); 172,280 (2021 proj.); 200,493 (2022 proj.).

Administrative note

• It is expected that the next Article IV consultation with Guinea will be held on the standard 12‑month cycle.

Press Release No. PR21/202, IMF Communications Department, June 30, 2021.

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• IMF COVID-19 Hub
• Policy Tracker
• Financial Assistance
• Questions & Answers
• Guinea and the IMF
• IMF Policy Advice -- A Factsheet
• Press Releases
• PRESS CENTER
• http://www.IMF.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home