Guinea: Selected Issues

This Selected Issues paper examines the potential medium and long-term effects of the Simandou iron ore project on Guinea’s economy and income distribution. The paper uses two complementary macroeconomic models. If production began in 2025, the level of real gross domestic product would be around 26 percent by 2030 compared to a baseline scenario without the project. The project would induce a currency appreciation of around 3 percent in 2025 and 2 percent in 2030. It would lead to an increase in employment, but the positive impact on private consumption and inequality could be limited without active policies. Different policy scenarios suggest that spending the potential tax revenues on education and infrastructure results in higher growth and stronger poverty reduction. Results show that the investment of tax revenues in infrastructure and education would foster the positive impact of the project on growth and poverty reduction.