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- GDP (PPP):
- $12.5 billion
- 2.5% growth
- 2.4% 5-year compound annual growth
- $1,125 per capita
- Inflation (CPI):
- FDI Inflow:
Guinea’s economic freedom score is 52.1, making its economy the 144th freest in the 2015 Index. Its overall score has decreased by 1.4 points, reflecting declines in half of the 10 economic freedoms, including investment freedom, property rights, the management of public spending, and fiscal freedom. Guinea is ranked 33rd out of 46 countries in the Sub-Saharan Africa region, and its overall score is below the world and regional averages.
Wracked by political instability and violence after a military coup in 2008, Guinea has yet to return to the levels of economic freedom witnessed in the mid-2000s. With significant bauxite reserves, a main source of aluminum, Guinea’s relatively closed economy relies on export earnings to fund the importation of food. The financial sector is underdeveloped and poorly integrated, and many Guineans do not hold formal bank accounts. The government’s myriad rules and regulations deter investors.
Entrepreneurial activity faces many hurdles. The business licensing process is lengthy and expensive, and the formal labor market remains underdeveloped and resistant to economic changes. The public sector dominates formal employment. Ineffective rule of law and rampant corruption undermine private-sector economic activity that could lift many Guineans out of poverty.
In 2010, Alpha Conde won Guinea’s first presidential election since independence from France in 1958. The election was marred by irregularities and political violence. In 2013, Conde’s Rally of the Guinean People party won a majority of seats in flawed parliamentary elections. According to the U.N., roughly 10,000 refugees from Côte d’Ivoire, Liberia, and Sierra Leone resided in Guinea in 2014. This has strained government services, generated ethnic tensions, and soured relations with bordering nations. Guinea has two-thirds of the world’s bauxite reserves and large deposits of iron ore, gold, and diamonds, but the population remains impoverished due to the lack of property rights, rampant corruption, poor government administration, limited infrastructure, and political instability.
Despite rich natural resources, most Guineans live in poverty, partly because of rampant corruption. A 2014 FBI investigation found that a British front company (BGSR) bribed government officials to win a mining concession for $165 million; BGSR later sold 51 percent of the mine to Brazilian firm Vale for $2.5 billion. The courts are subject to political interference, and protection of property rights is weak.
The top individual income tax rate is 40 percent, and the top corporate tax rate is 35 percent. Other taxes include a value-added tax and an inheritance tax. Overall tax revenue equals 19 percent of gross domestic product, and government spending is equivalent to 26.1 percent of the domestic economy. Public debt equals 38 percent of GDP after debt forgiveness by the IMF in 2012.
Private enterprises face numerous hurdles. The minimum capital requirement for launching a company exceeds four times the level of average annual income, and completing licensing requirements takes more than three months. The formal labor market is underdeveloped. Despite substantial subsidies provided to the state electrical utility, there are widespread and frequent power shortages. The government cut fuel subsidies in 2014.
Guinea’s average tariff rate is 11.9 percent. Non-tariff barriers including restrictions on imports like rice, flour, and sugar further impede trade. The government has expressed a desire to attract foreign investment, but the uncertain political climate is a deterrent. The financial sector remains underdeveloped. Most economic activity remains outside of the formal banking sector as there are fewer than 10 commercial banks.