IMF Executive Board Concludes the 2016 Article IV Consultation with Guinea
IMF News, July 25, 2016
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- Published: July 25, 2016
Recent economic performance and shocks
- Economic growth averaged 1.8 percent during 2012–15, significantly below the performance of peers.
- GDP per capita is estimated to have fallen, likely inducing an increase in poverty.
- Key shocks: Ebola epidemic, sharp decline in commodity prices, and political uncertainty.
2016 recovery and near-term indicators
- Growth is projected to rebound to 3.7 percent in 2016, supported by higher electricity provision from the Kaleta hydroelectric dam and a strong increase in bauxite production.
- Inflation increased to 7.9 percent in April 2016 driven by stronger domestic demand and a weaker exchange rate.
- Bank credit to the private sector continued to grow at rapid rates.
- Reserve buffers increased and stabilized at 2.4 months of imports, after significant losses in 2014–15.
Medium-term outlook and risks
- Growth is projected to average 4.5 percent over the next five years.
- Inflation is projected to decline gradually to 5 percent by 2019.
- The basic fiscal balance is projected to remain around ½ percent of GDP, reflecting financing constraints and prudent policies to strengthen reserves.
- Main downside risks: a sharper-than expected global growth slowdown that would delay mining projects; deterioration in the region’s security; a resurgence of the Ebola epidemic; and political uncertainty.
Authorities’ economic strategy (2016–22) — goals and channels
- Aim: unlocking broad-based and inclusive growth driven by investments in electricity, roads, and agriculture.
- Role of the private sector: new mining projects, new transformation units of agricultural products, and large residential housing projects and administrative buildings through PPPs.
Executive Board assessment — findings and policy advice
- Directors welcomed recovery from Ebola and progress under the Fund-supported program, including a strong fiscal adjustment in the first quarter of 2016.
- Noted that the epidemic and commodity-price decline caused a serious socioeconomic setback.
- Supported the authorities’ plan to scale up public investment to foster broad-based growth and improve living conditions, but underscored the need to safeguard fiscal sustainability.
- Fiscal policy recommendations:
- Implement the planned fiscal adjustment in 2016 to strengthen fiscal buffers, including against fiscal risks from the energy sector.
- Build fiscal space for priority investment and social spending by:
- improving tax administration and compliance,
- tapping the unrealized tax potential,
- containing the government wage bill and energy subsidies,
- enhancing the efficiency of public spending,
- pursuing improvements in public financial management.
- Exercise caution in undertaking large public investments; take into account available financing and ensure a strong process for selecting and managing investment projects.
- Limit recourse to nonconcessional finance; seek concessional financing to the extent possible.
- Redouble efforts to strengthen debt management and reduce domestic arrears.
- Monetary and exchange rate policy recommendations:
- Support for a prudent monetary policy stance aimed at raising international reserves cover and containing inflation.
- Welcome work on a draft central bank law intended to reduce fiscal dominance and facilitate monetary policy; encourage consideration of other recommendations from the updated Safeguards Assessment.
- Welcome reform of the foreign exchange system and recommend proceeding with next steps to close remaining exchange rate misalignment.
- Note that transitioning to exchange rate flexibility in the medium term will help safeguard competitiveness and international reserves.
- Financial sector and inclusion:
- Call for enhancing risk-based supervision, improving financial intermediation and inclusion.
- Look forward to reform of the National Strategy for Financial Inclusion and to strengthening the AML/CFT regime.
- Structural reforms and governance:
- Emphasized addressing structural impediments to higher growth and diversification.
- Welcomed efforts to enact a new mining code and reform agriculture.
- Urged completion of reforms under the ECF-supported arrangement and continued efforts to enhance the business climate, strengthen governance, and improve public service delivery.
Selected economic indicators (2013–21) — key figures from the publication
- GDP at constant prices (annual percent change): 2013: 2.3; 2014: 1.1; 2015: 0.1; 2016 Est.: 4.0; 2017 Prog.¹: 3.7; 2018 Proj.: 4.3; 2019: 4.5; 2020: 4.8; 2021: 5.0.
- Consumer price index (end of period): 2013: 10.5; 2014: 9.0; 2015: 7.3; 2016 Est.: 8.5; 2017 Prog.¹: 9.1; 2018 Proj.: 7.5; 2019: 6.0.
- Money and credit (percent of broad money stock at beginning of period):
- Net domestic assets: 2013: 14.4; 2014: 20.6; 2015: 31.2; 2016 Est.: 6.6; 2017 Prog.¹: 3.9; 2018 Proj.: 3.5.
- Net claims on government: 2013: 10.2; 2014: 17.2; 2015: -0.9; 2016 Est.: 1.8; 2017 Prog.¹: -1.0; 2018 Proj.: -1.4.
- Credit to non-government sector: 2013: 9.7; 2014: 13.7; 2015: 10.8; 2016 Est.: 5.7; 2017 Prog.¹: 5.1; 2018 Proj.: 5.5; 2019: 5.3; 2020: 4.4.
- Broad money (M2): 2013: 14.1; 2014: 12.3; 2015: 20.3; 2016 Est.: 11.0; 2017 Prog.¹: 11.2; 2018 Proj.: 18.9; 2019: 7.7; 2020: 14.8; 2021: 12.2.
- External sector:
- Gross available reserves (months of imports)³: 2013: 3.0; 2014: 2.1; 2015: 3.2; 2016 Est.: 3.4; 2017 Prog.¹: 3.8.
- Central government finances (percent of GDP):
- Total revenue and grants: 2013: 19.9; 2014: 21.9; 2015: 19.0; 2016 Est.: 24.3; 2017 Prog.¹: 23.5; 2018 Proj.: 23.9; 2019: 24.5; 2020: 24.6.
- Revenue: 2013: 18.4; 2014: 17.9; 2015: 17.5; 2016 Est.: 19.7; 2017 Prog.¹: 19.8; 2018 Proj.: 20.1; 2019: 20.4.
- Total expenditure and net lending: 2013: 25.1; 2014: 26.1; 2015: 27.8; 2016 Est.: 25.6; 2017 Prog.¹: 24.7; 2018 Proj.: 24.8; 2019: 24.9.
- Overall budget balance, incl. grants: 2013: -5.2; 2014: -4.1; 2015: -8.7; 2016 Est.: -1.3; 2017 Prog.¹: -1.2; 2018 Proj.: -0.6; 2019: -0.3; 2020: -0.2.
- Basic fiscal balance: 2013: -2.8; 2014: -6.4; 2015: -6.9; 2016 Est.: -0.4; 2017 Prog.¹: -0.5; 2018 Proj.: -0.7.
- National accounts:
- Gross capital formation: 2013: 9.3; 2014: 16.9; 2015: 16.5.
- Savings: 2013: -8.0; 2014: -8.5; 2015: 2.2; 2016 Est.: 3.3; 2017 Prog.¹: 0.7; 2018 Proj.: 0.4; 2019: -3.5.
- Debt:
- External public debt, incl. IMF: 2013: 21.8; 2014: 25.5; 2015: 25.4; 2016 Est.: 28.4; 2017 Prog.¹: 30.7; 2018 Proj.: 31.4; 2019: 30.6.
- Total public debt, incl. IMF: 2013: 41.9; 2014: 43.1; 2015: 49.1; 2016 Est.: 44.7; 2017 Prog.¹: 48.6; 2018 Proj.: 48.1; 2019: 46.4; 2020: 44.4; 2021: 42.1; (final row) 38.6.
IMF Communications Department — Press Release, July 25, 2016.