Algeria Economy

Algeria Economy Overview


Estimated GDP: US $ 219.5 billion (2014)

Per capita income (purchasing power parity): US $ 13,070

Human Development Rank (HDI): Rank 85 (of 189) (2017)

Proportion of poverty (national poverty line): 23% (2006)

Distribution of income (Gini coefficient): 35.3

Economic Transformation Index (BTI): 70 of 129 (2014)

General assessment

According to ehistorylib, Algeria’s economy depends heavily on the export of oil and natural gas. Thanks to persistently high oil and gas prices, Algeria has been able to record continuous growth averaging 3% over the years. After 2.8% in 2011, growth of 3.3% was achieved in 2012 and 2.8% in 2013. The Algerian foreign trade balance shows a surplus of 21.5 billion US dollars for 2012 and 11.5 billion US dollars for 2013; foreign exchange reserves rose to around 197 billion US dollars at the end of 2014, but have fallen dramatically since then . Therefore, the country is still practically debt free for the time being, the days when the IMF had to seek help due to low oil prices seem to be over for good. However, Algeria returned to its external debt in the second half of 2015 – this will have to be pursued further. However, rising import prices and falling export prices significantly reduce the foreign trade surplus. However, policymakers are becoming increasingly nervous and preparing the country for tougher times as the trends are clearly negative. However, an explicit fiscal austerity course is still ruled out for the time being, even though many infrastructure projects were canceled in 2016.

For 2017, however, the outlook is gloomy. A new budget law provides for, among other things, an increase in value added tax, higher land and real estate taxes and higher taxation of rents, fuel and everyday goods. Public spending is drastically reduced – some voices are already speaking of a “ declaration of war ” on Algerian society. There is increasing nervousness among the elites that the “ rampant welfare state ” could lead to renewed indebtedness and to Algeria having to submit to the IMF again in a few years.

The ” rente petrolière ” is fragile in the long term – there is also the uncertainty about the future political development and the stability of the country. If the demand for oil and natural gas continues to decline and prices continue to fall, public debt could rise again and reach 100% of the national product by 2050. The forecasts have already had to be revised slightly downwards due to the current drop in prices, but the fundamental trends will not change, at least in the short term. The prospects for the future are rather bleak.

An ambitious program worth 130 billion euros to modernize the infrastructure and alleviate the housing crisis has been accompanied by a general economic upswing since the turn of the millennium. Nevertheless, in the last 5 years, the share of industries outside of energy in the overall economy fell from 18 to 5 percent.

Despite the ambitious housing construction program, the demand for approx. 300,000 apartments annually also exceeds the national possibilities, which are estimated to be a maximum of 80,000 apartments.

For the first time, a government statement in June 2014 spoke of an end to the gas boom by 2030 and the need to use the production for the country’s internal needs. The fracking method should also be used on a large scale in order to stretch the transition to the time after the exhaustion of gas and oil resources as much as possible. However, a final decision on this has not been made, the energy minister, who strongly promotes the fracking method – last snapshot in the Algerian intrigue jungle – was replaced in mid-May 2015.

Theoretically and in terms of the propagated claim, the model of the centralized economy has been abandoned, but in practice – supposed French colonial heritage – a massive regulatory bureaucracy dominates. Additional restrictions on economic freedom of action result from corruption, an uncertain legal situation and an inefficient banking system. However, there is no acute need to remedy the grievances, as the state apparatus has sufficient liquid funds from the oil and gas business. Imports can meet the demand for consumer goods and everyday objects as well as food, and there is also a lively black market.

According to official information, an unemployment rate of less than 10% is now assumed for the first time, of which 70 percent are younger than 30 years old. These young people in turn make up around 70 percent of the population. Unemployment results from the decline in manufacturing and agriculture, which created many jobs in the Boumedienne era.

However, unemployment in the 16-24 age group is over 20%. At present, the young people affected are being encouraged to develop a professional perspective; for this purpose, loans and tax incentives are offered. It remains to be seen whether this will have a lasting effect. There are positive examples; Success stories are often presented.

The inflation moves at a level that makes regular adjustments of government transfer payments needed inbes. in pensions. Strong price fluctuations or increases in basic foodstuffs due to climate fluctuations and alleged speculation make a significant increase appear necessary. With government coffers full, this shouldn’t be the biggest problem now and in the near future.

Algeria Economy