Authors : Tarik Benbahmed, Hervé Lohoues
Algeria’s economic performance continues to be affected by the fall in the price of oil, down from an average of USD 99 per barrel in 2014 to USD 53 the following year and then USD 45 in 2016. Coupled with the strong appreciation of the US dollar (USD), this external shock resulted in a deepening of the budget and external account deficits, as in 2015, while the impact on the real sector remains limited.
Real gross domestic product (GDP) growth in 2016 was 3.5%, compared with 3.8% in 2015 following recovery in the hydrocarbons sector based on increases in production, refining and liquefaction activities.
Inflation rose to 6.4% in 2016, compared with 4.8% in 2015, after two consecutive years (2013 and 2014) in which it fell. The rise was due to increases of 9.9% in the price of manufactured goods and 7.4% in the cost of services. It can be attributed in particular to restrictions on imports, a 30% rise in the price of fuel in 2016 and anticipation of the rises in value-added tax (VAT) planned for 2017.
The public finances saw more than 60% of the resources of the revenue regulation fund ( fonds de régulation des recettes [FRR]) vanish. Its legal limit floor of DZD 740 billion (Algerian dinars) will be removed in 2017. The fund has served among other things to finance the general budget deficit which amounted in 2016 to 13.2% of GDP after a record amount of 15.3% in 2015.
The current account showed a deficit of 13.5% of GDP in 2016, compared with a deficit of 16.60% in 2015 while official exchange reserves fell by 20% to USD 114 billion at the end of 2016. This outcome results from the trade balance deficits of 10.8% in 2016 and 8.4% in 2015, a year in which the trade balance turned negative for the first time in 16 years, another direct result of the fall in the price of oil.
Over the last 30 years Algeria has de-industrialised. In 2015 manufacturing industry, excluding hydrocarbons, accounted for no more than 5% of GDP, compared with 35% at the end of the 1980s. The private sector is predominant in leather and footwear (90%); textiles (87%); agrifood (87%); chemicals, rubber and plastics (78% including pharmaceuticals); and construction materials (52%). The country has almost 2.7 million entrepreneurs, of whom 16% work in industry. Entrepreneurs have become indispensable partners of the state, which consults them in the setting of the Tripartite, a national discussion forum where the main government policy orientations and decisions are debated.
Unlock the potential of African entrepreneurs for accelerating Africa’s industrial transformation, says the African Economic Outlook 2017
AfricanEconomicOutlook.org offers comprehensive and comparable data and analysis of 54 African economies.