Guinea's economic recovery in the aftermath of the ebola epidemicwill continue in 2017 and 2018, driven by an improving outlook forthe mining sector, agriculture and big infrastructure projects.
Inflation in Guinea will fall in the years ahead as increasing food supplytempers food price inflation. Furthermore, the Banque Centralede la République de Guinée's decision to improve exchange rateflexibility will limit excessive inflation as currency adjustments occurat more gradual pace, stabilising increases in import costs.
Guinea's budget balance will narrow in the years ahead as thegovernment implements fiscal consolidation in response to subduedrevenues. Sovereign risks will remain elevated due to persistentdeficit financing needs, despite the narrowing of the fiscal balanceover the years ahead.
Guinea's current account deficit will narrow, but remain sizable, in theyears ahead on the back of rising bauxite exports and the gradualrecovery in commodity prices. Guinea's sizable current accountdeficit as well as continued government financing needs will drivethe country's external debt load higher, thereby keeping sovereignrisks elevated in the years ahead.
We believe that instability in Guinea is likely over the next ten yearsgiven lack of inclusive economic development and the incumbentpresident's supposed plans to run for a third term in office. Themilitary's ongoing involvement in the country's political affairs meansthat the possibility of a coup cannot be ruled out.