Economy of Guinea

The economy of Guinea is dependent largely on agriculture and other rural activities. Guinea is richly endowed with good minerals, possessing an estimated quarter of the world's proven reserves of bauxite, more than 1.8 billion tonnes (2.0 billion short tons) of high-grade iron ore, significant diamond and gold deposits, and undetermined quantities of uranium. In 2021, Guinea was the world's biggest exporter of Aluminium Ore ($3.2B/ Gold $5.5B) 2021 trade surplus was $4.3B.<br>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.

Top Sectors in Guinea

Mining in Guinea

Mining is a cornerstone of Guinea's economy, with bauxite mining and alumina production providing about 80% of the country's foreign exchange. Guinea possesses an estimated one-third of the world's proven reserves of bauxite, more than 1.8 billion metric tons (2.0 billion short tons) of high-grade iron ore, significant diamond and gold deposits, and undetermined quantities of uranium. In 2019, Guinea ranked as the world's 3rd largest producer of bauxite. Several U.S. companies are active in the mining sector, contributing to the country's export revenues. Future plans include the exploitation of Guinea's extensive iron ore deposits under concession agreements. The demand for alumina, driven by China's economic growth, has sparked renewed interest in Guinea's mineral wealth. Projects like the consortium of Alcan and Alcoa, partnering with the Guinean government in the CBG mining in northwestern Guinea, and Canadian start-up Global Alumina's proposed alumina plant represent significant investments in the region. However, revenue from bauxite mining is anticipated to decline notably in 2010, largely due to global economic conditions impacting demand and prices.

Agriculture in Guinea

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. Possibilities for investment and commercial activities exist in all these areas, but Guinea's poorly developed infrastructure continues to present obstacles to investment projects.

Energy in Guinea

Three primary energy sources make up the energy mix in Guinea - biomass, oil, and hydropower. Biomass, predominantly charcoal, constitutes 78% of Guinea's primary energy consumption and is locally produced. Guinea imports all petroleum products to meet its energy needs.

Communications in Guinea

Guinea has a single government-owned radio network, a growing number of private radio stations, and one government TV station. The fixed telephone system is inadequate, with just 18,000 lines to serve the country's 10.5 million inhabitants in 2012. The mobile cellular system is expanding rapidly, with an estimated 4.8 million lines in 2012. Internet usage remains very low, reaching only 1.5% of the population in 2012.

Guinea - Key Economic Indicators

Exports and Imports

Guinea's economy is heavily reliant on exports of minerals, particularly bauxite, which constitutes a significant portion of the country's export earnings. Other key exports include gold, diamonds, and agricultural products such as coffee and bananas. Imports consist primarily of petroleum products, machinery, equipment, and foodstuffs. The balance of trade fluctuates based on global commodity prices and domestic production levels.

Infrastructure

Guinea's infrastructure faces challenges in terms of maintenance and development. The road network, while extensive, is often in poor condition, especially in rural areas. Major highways connect urban centers, but rural accessibility remains limited. The country's ports, including the Port of Conakry, are crucial for exporting minerals and agricultural products. Investment in infrastructure is needed to improve transportation, electricity generation, and telecommunications to support economic growth.

Balance of Trade

Guinea typically experiences a trade surplus due to its substantial exports of minerals, particularly bauxite. In recent years, the country has focused on expanding its export base beyond raw materials to include processed goods and agricultural products. However, the trade balance can be volatile due to fluctuations in commodity prices and global demand. Efforts to diversify exports and reduce import dependency are ongoing to stabilize the trade balance over the long term.

Fiscal Policy

Guinea's fiscal policy aims to manage government spending and taxation to support economic development and social welfare. The government's revenue primarily comes from taxes on income, goods and services (Value Added Tax - VAT), and international trade. Public expenditure focuses on infrastructure development, education, healthcare, and poverty reduction programs. The tax-to-GDP ratio in Guinea is approximately 16-17%, reflecting efforts to increase revenue collection efficiency and broaden the tax base.

Monetary Policy

Monetary policy in Guinea is managed by the Central Bank of the Republic of Guinea (BCRG). The central bank's objectives include maintaining price stability, promoting economic growth, and ensuring financial system stability. BCRG uses tools such as interest rate adjustments and open market operations to control inflation and manage liquidity in the banking system. The Guinean Franc (GNF) is the official currency, with exchange rate stability crucial for economic stability and trade.

Trade Agreements

Guinea is a member of several trade agreements within the Economic Community of West African States (ECOWAS) and the African Continental Free Trade Area (AfCFTA), which aim to facilitate regional trade and economic integration. These agreements provide preferential access to neighboring markets and support Guinea's export-oriented industries, particularly in minerals and agriculture. Efforts to strengthen trade relations with global partners are ongoing, enhancing market access and economic diversification.

Environmental Regulations

Environmental regulations in Guinea aim to mitigate the impact of mining activities on natural ecosystems and biodiversity. The government has implemented laws and policies to promote sustainable resource management and reduce environmental degradation. Challenges include illegal mining practices and deforestation, requiring stricter enforcement and community engagement to ensure compliance with environmental standards and promote responsible mining practices.

Tax System in Guinea

Capital Gains Tax: Guinea imposes a capital gains tax on profits from investments, including gains from the sale of assets such as stocks, bonds, real estate, and other investments. The tax rate for capital gains can vary depending on the type of asset and the holding period.
Corporate Tax Rate: The corporate tax rate in Guinea is 35% on business profits earned within the country. This rate applies to both domestic and foreign companies operating in Guinea. Certain industries or projects may benefit from tax incentives or reduced rates as part of government efforts to stimulate economic development.
Sales Tax: Guinea applies a Value Added Tax (VAT) on goods and services, with a standard rate of 18%. The VAT is collected at each stage of production or distribution, ensuring comprehensive coverage across the supply chain. Certain essential goods and services may be exempted or subject to reduced rates.
Property Tax: Property tax in Guinea is levied on real estate based on the assessed value of the property. Rates and regulations governing property taxes may vary by region or municipality within the country. Property taxes contribute to local government revenue and funding for public services and infrastructure.
Payroll Tax: Payroll taxes in Guinea are used to fund social security programs and are levied on wages and salaries. Both employers and employees contribute to these taxes, which finance pensions, healthcare, and other social benefits. The total payroll tax rate is approximately 20%, with specific rates varying based on income levels and employment categories.
Tax Deductions and Credits: Guinea provides various tax deductions and credits to reduce the tax liability of individuals and businesses. These incentives may include deductions for business expenses, investments in priority sectors, and contributions to social programs. Tax credits are available for activities that promote economic development, job creation, and environmental sustainability.
Tax Compliance: Tax compliance in Guinea faces challenges due to informal economic activities and administrative inefficiencies. The government is working to improve tax collection efficiency through digital systems and stricter enforcement measures. Compliance rates vary, and efforts are ongoing to combat tax evasion and increase revenue transparency.
Tax Burden: The overall tax burden in Guinea is relatively high compared to other countries in the region, with tax revenue contributing approximately 14-15% of GDP annually. The government relies on taxes to fund public services, infrastructure projects, and social welfare programs. Efforts to streamline tax administration and reduce the informal economy aim to strengthen revenue collection and support sustainable economic growth.

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Procurement for carrying out support activities for the work of managing the social impacts of mining company operations.

Guinea

04 Jul 2024

24 Jul 2024