Lably
Skip to content

Economy of Guinea

Set of productive activities developed in Guinea

  • 11 min read
  • 3 chapters

Related on Lably

Through Bauxite, Intensive farming and Central bank

Lab · Class 10Reactivity of MetalsLab · Class 10Metals and Non-MetalsLab · Class 6–12Ancient Indian Ocean TradeLab · Class 7–12Money, Banking & Credit

Guinea also has considerable potential for growth in the agricultural and fishing sectors. Land, water, and climatic conditions provide opportunities for large-scale irrigated farming and agroindustry. Remittances from Guineans living and working abroad and coffee exports account for the rest of Guinea's foreign exchanges industry.

Economic history

Guinea was part of the franc zone countries that included most of the former French Colonies. After Independence, these countries did not become completely economical free. France decided against monetary autonomy hence they could not use a freely convertible currency. The state intervention of the new governments was characterized by stops of quotas on imports and internal price controls. In the time up to c. 1980, the franc-zone countries had on average a lower inflation and a higher economic growth compared to the Anglophone counterparts, who could use their own currencies. But regarding the time after c. 1980 and the economic liberalism, characterized by Structural Adjustments, the franc zone countries could not outperform the rest.

Since 1985, the Guinean Government has adopted policies to return commercial activity to the private sector, promote investment, reduce the role of the state in the economy, and improve the administrative and judicial framework. The government has eliminated restrictions on agricultural enterprise and foreign trade, liquidated many parastatals, increased spending on education, and vastly downsized the civil service. The government also has made major strides in restructuring the public finances.

The IMF and the World Bank are heavily involved in the development of Guinea's economy, as are many bilateral donor nations, including the United States. Guinea's economic reforms have had recent notable success, improving the rate of economic growth to 5% and reducing the rate of inflation to about 99%, as well as increasing government revenues while restraining official expenditures. Although Guinea's external debt burden remains high, the country is now current on external debt payments.

Current GDP per capita of Guinea shrank by 16% in the 1990s.

The government revised the private investment code in 1998 to stimulate economic activity in the spirit of a free enterprise. The code does not discriminate between foreigners and nationals and provides for repatriation of profits. Foreign investments outside Conakry are entitled to especially favorable conditions. A national investment commission has been formed to review all investment proposals. The United States and Guinea have signed an investment guarantee agreement that offers political risk insurance to American investors through OPIC. Guinea plans to inaugurate an arbitration court system to allow for the quick resolution of commercial disputes.

Mean wages were $0.45 per man-hour in 2009.

In 2002, the IMF suspended Guinea's Poverty Reduction and Growth Facility (PRGF) because the government failed to meet key performance criteria. In reviews of the PRGF, the World Bank noted that Guinea had met its spending goals in targeted social priority sectors. However, spending in other areas, primarily defense, contributed to a significant fiscal deficit. The loss of IMF funds forced the government to finance its debts through central bank advances. The pursuit of unsound economic policies has resulted in imbalances that are proving hard to correct.

Under then-Prime Minister Diallo, the government began a rigorous reform agenda in December 2004 designed to return Guinea to a PRGF with the IMF. Exchange rates have been allowed to float, price controls on gasoline have been loosened, and government spending has been reduced while tax collection has been improved. These reforms have not reduced inflation, which hit 27% in 2004 and 30% in 2005. Currency depreciation is also a concern. The Guinea franc was trading at 2550 to the dollar in January 2005. It hit 5554 to the dollar by October 2006. In August 2016 that number had reached 9089.

Despite the opening in 2005 of a new road connecting Guinea and Mali, most major roadways remain in poor repair, slowing the delivery of goods to local markets. Electricity and water shortages are frequent and sustained, and many businesses are forced to use expensive power generators and fuel to stay open.

Even though there are many problems plaguing Guinea's economy, not all foreign investors are reluctant to come to Guinea. Global Alumina's proposed alumina refinery has a price tag above $2 billion. Alcoa and Alcan are proposing a slightly smaller refinery worth about $1.5 billion. Taken together, they represent the largest private investment in sub-Saharan Africa since the Chad-Cameroon oil pipeline. Also, Hyperdynamics Corporation, an American oil company, signed an agreement in 2006 to develop Guinea's offshore Senegal Basin oil deposits in a concession of 80,000 square kilometres (31,000 sq mi); it is pursuing seismic exploration.

On 13 October 2009, Guinean Mines Minister Mahmoud Thiam announced that the China International Fund would invest more than $7bn (£4.5bn) in infrastructure. In return, he said the firm would be a "strategic partner" in all mining projects in the mineral-rich nation. He said the firm would help build ports, railway lines, power plants, low-cost housing and even a new administrative centre in the capital, Conakry. In September 2011, Mohamed Lamine Fofana, the Mines Minister following the 2010 election, said that the government had overturned the agreement by the ex-military junta.

Youth unemployment remains a large problem. Guinea needs an adequate policy to address the concerns of urban youth. One problem is the disparity between their life and what they see on television. For youth who cannot find jobs, seeing the economic power and consumerism of richer countries only serves to frustrate them further.

Sign in to keep reading

2 more chapters are free with a Lably account.

More in Economics

European CommissionExecutive branch of the European UnionThe EconomistBritish news and current affairs journalTertiary sectorService sectorEconomistProfessional in the discipline of economicsSecondary sectorManufacturing and construction industriesEconomic developmentProcess and policies to improve economic well-being