Authors

Tarik Benbahmed, Hervé Lohoues

Overview

• The Algerian economy's real growth was an estimated 3% in 2013, driven mainly by domestic demand, including public investment. This growth performance was achieved with inflation slowing to 3.3% thanks to the Algerian government's efforts to control market liquidity, contain the expansion of demand for goods and services and increase supply.

• Algeria's good external position continued to weaken in 2013: the current-account surplus fell to 1.2% of GDP (from 5.9% in 2012) as oil and gas exports declined and imports rose. However, Algeria is pursuing its policy of low external debt and has strong foreign exchange reserves equivalent to more than three years of imports.

• The oil and gas company Sonatrach is the flagship of Algerian industry, dominating trade and global value chains. It is Africa's largest company, with a consolidated turnover of around USD 100 billion in 2013.

Recent Developments & Prospects

Macroeconomic Policy

Fiscal Policy

Monetary Policy

Economic Cooperation, Regional Integration & Trade

Debt Policy

Economic & Political Governance

Private Sector

Financial Sector

Public Sector Management, Institutions & Reform

Natural Resource Management & Environment

Political Context

Social Context & Human Development

Building Human Resources

Poverty Reduction, Social Protection & Labour

Gender Equality

Thematic analysis: Structural transformation and natural resources

Authors: Tarik Benbahmed, Hervé Lohoues

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  • The Algerian economy’s real growth was an estimated 3% in 2013, driven mainly by domestic demand, including public investment. This growth performance was achieved with inflation slowing to 3.3% thanks to the Algerian government’s efforts to control market liquidity, contain the expansion of demand for goods and services and increase supply.
  • Algeria’s good external position continued to weaken in 2013: the current-account surplus fell to 1.2% of GDP (from 5.9% in 2012) as oil and gas exports declined and imports rose. However, Algeria is pursuing its policy of low external debt and has strong foreign exchange reserves equivalent to more than three years of imports.
  • The oil and gas company Sonatrach is the flagship of Algerian industry, dominating trade and global value chains. It is Africa’s largest company, with a consolidated turnover of around USD 100 billion in 2013.

Benefiting from political stability, Algeria’s economy continued to perform solidly in 2013,growing by 3% (3.3% in 2012). Growth was driven by private demand and investment by public enterprises, which offset a downturn in public expenditure and exports, especially oil and gas. After stabilising at 10.0% between 2010 and 2012, unemployment fell slightly in 2013, standing at 9.8% in September.

Inflation returned to its pre-2012 level, falling from 8.9% to 3.3% thanks to a prudent monetary policy, fiscal consolidation and government measures to control and improve distribution channels for consumer goods.

Algeria’s external position remains solid, but showed the first signs of a slowdown. The current-account surplus contracted to 1.2% of GDP (compared to 5.9% of GDP in 2012) as exports fell and imports rose. Foreign exchange reserves, however, remain solid, amounting to USD 196 billion (more than three years of imports) at the end of the year, while external debt remained low at USD 3.2 billion, or 1.5% of GDP.

China has become Algeria’s largest supplier, providing 12.0% of Algerian imports, compared to France’s 11.4%. Algeria’s other main suppliers are Italy, Spain and Germany. Spain, Italy, the United Kingdom and France are Algeria’s main export markets, with the United States – the main export market in 2012 – falling to sixth place.

In 2014 oil and gas are set to recover and public expenditure is forecast to rise by 11.3%, mainly for investment to support domestic demand. As a result, forecasts predict growth of 4.3% and inflation of 4.2%.

Analysis of global value chains (GVCs) shows that the reforms to and dismantling of the public industrial sector have several consequences: assets were privatised, imports were replaced by domestic production, productivity was low, and the informal sector grew. The government sought to break this dynamic by adopting a policy for the recovery and industrial integration of sectors of the economy to increase and diversify domestic production and create jobs.

Table 1: Macroeconomic indicators

 20122013(e)2014(p)2015(p)
Real GDP growth3.33.04.34.2
Real GDP per capita growth1.40.82.52.4
CPI inflation8.93.34.24.0
Budget balance % GDP-4.8-0.2-2.1-2.6
Current account balance % GDP5.91.20.30.4

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors’ calculations.

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