Economic activity is expected to accelerate in 2022, driven by mining production and the ongoing recovery in the non-mining sector, although global and domestic uncertainties cloud the outlook. Inflation picked up in 2021 as a result of Covid-related supply constraints, rising global prices, and accommodative macro policies, and it is expected to gradually decline this year. The conflict in Ukraine poses a potential threat to Guinean mining production and investment. The spillovers of the conflict may also result in higher international fuel and food prices, which would negatively impact the Guinean economy.

An International Monetary Fund (IMF) staff team, led by Ms. Clara Mira, held a virtual Staff Visit from February 28 to March 4, 2022, to discuss economic developments and outlook.

At the conclusion of the visit, Ms. Mira made the following statement:

“The Guinean economy continues to show resilience, recording high and sustained mining sector growth and a gradual—moderately slower than previously projected—recovery of the non-mining sector. Growth is expected to strengthen in 2022 and could be close to 5 ½ percent, supported by strong mining output coupled with the continuation of the recovery in the non-mining sector, reinforced by the easing of Covid-related disruptions and the expected settlement of government payment arrears.

“Average prices increased by 12½ percent in 2021, owing to rising food and freight prices and loosened fiscal and monetary policies to support post-pandemic recovery. Going forward, government repayment of central bank advances and the recent appreciation of the Guinean franc should offset some of the inflationary pressure stemming from rising international commodity prices.

“Risks remain tilted to the downside, and uncertainty is pronounced. The conflict in Ukraine poses a potential threat to Guinean mining production and investment. The spillovers of the conflict may also result in higher international fuel and food prices, which would negatively impact the Guinean economy, increase fiscal pressures and exacerbate the already high levels of poverty. Domestically, prolonged political uncertainty might weigh on the outlook.

“Staff and the authorities discussed the need for monetary policy to follow economic developments closely and actively manage liquidity if domestic price pressures intensify. On the fiscal policy front, discussions covered the need to strengthen domestic revenue mobilization, particularly in the mining sector. The authorities’ commitment to repay arrears will support a more vibrant private sector and help improve credit intermediation. The authorities’ commitment to use the SDR allocation prudently and transparently is expected to support investments in infrastructure and social sectors. Continuing to protect the most vulnerable against the difficult conditions is essential.

“The team met with Prime Minister Mohamed Beavogui, Minister of Economy, Finance, and Planning Lanciné Conde, Central Bank Governor Karamo Kaba, Minister of Budget Moussa Cissé, Minister of Energy, Hydraulics and Hydrocarbons Ibrahima Abé Sylla and other senior officials, and representatives from the private sector, civil society and the development partner community. The IMF mission wishes to express its gratitude to the Guinean authorities and other stakeholders for the constructive and fruitful discussions during the visit.”