Guinea’s Economic Outlook Brightens as Reserves Rise to 4%

Conakry, Guinea - The economy of Guinea has shown significant improvement in recent months, with gross international reserves increasing to a record high of 3.6 months of imports at the end of March, up from 3.3 months at the end of 2018.

Strong Foreign Direct Investment and Infrastructure Projects Drive Growth

The upward trend is expected to continue, driven by strong foreign direct investment in the mining sector and future investments in infrastructure projects. The government’s efforts to improve governance and increase electricity supply are also expected to support the development of the private sector in the medium term.

Shallow and Informal Financial System Remains a Challenge

However, Guinea’s financial system remains shallow and informal, with total financial sector assets representing just 22% of GDP. The country’s banking sector dominates the financial landscape, accounting for 94.6% of total financial sector assets.

Insurance Companies and Non-Bank Deposit-Taking Institutions Face Challenges

According to the International Monetary Fund (IMF), the number of insurance companies and non-deposit-taking institutions has increased, but their share in the total assets of the financial sector declined in 2018. The decline is attributed to slow growth rates compared to the banking sector and performance issues in the non-bank deposit-taking institution sector.

Mobile Financial Services Support Financial Inclusion

The IMF also noted that Guinea’s economy is largely cash-based, with just 8% of the population having access to a bank account or non-bank deposit-taking institution at the end of 2017. However, mobile financial services have been an important factor in financial inclusion, with approximately 13.8% of the population having access to a mobile wallet and associated payment services.

Positive Outlook Ahead

Despite these challenges, Guinea’s economic outlook remains positive, driven by strong foreign direct investment and infrastructure projects. The government’s efforts to improve governance and increase electricity supply are expected to support the development of the private sector in the medium term.

Merging with WAEMU Expected to Boost Economy

The country is also working towards merging with the West African Economic and Monetary Union (WAEMU), which would create a single monetary zone in West Africa. Guinea has already started cooperating with WAEMU member states through the Economic Community of West African States (ECOWAS).

Conclusion

Overall, Guinea’s economic outlook is expected to remain bright, driven by strong foreign direct investment, infrastructure projects, and government efforts to improve governance and increase electricity supply.