Economic Studies


Population 41.5 million
GDP per capita 4,034 US$
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major macro economic indicators

  2016 2017 2018 2019 (f)
GDP growth (%) 3.2 1.4 1.5 1.9
Inflation (yearly average, %) 6.4 5.6 4.3 2.3
Budget balance (% GDP) -13.0 -6.6 -6.9 -8.4
Current account balance (% GDP) -16.7 -13.6 -7.6 -8.1
Public debt (% GDP) 21.8 28.8 32.5 36.8


(e): Estimate. (f): Forecast.


  • Significant oil and gas reserves
  • Renewable energy and tourism potential
  • Strong external financial position (very low external debt, large foreign exchange reserves)


  • High dependence on hydrocarbons and problems in using this income
  • Political crisis with an uncertain outcome
  • High youth unemployment rate
  • Overly large public sector
  • Red tape, financial sector weaknesses and problematic business environment

RIsk AssessmenT

Subdued growth, constrained by political uncertainty

After being constrained by the decline in hydrocarbon production in 2018 (particularly gas), growth will remain very restrained throughout 2019. Hydrocarbons are unlikely to significantly drive growth. Production quotas under the OPEC agreement and ageing oil fields will limit any increase in oil production. Political uncertainty, notably the likely delay in the adoption of the new hydrocarbon law due to the current social unrest, will likely weigh on the evolution of gas production. Therefore, although hydrocarbons still accounted for nearly 95% of export earnings, the contribution of the trade balance to growth will continue to drag on growth. The political situation and uncertainty over the country's governance will also affect private investment, which is already suffering from a complex business environment. In 2019, public investment is expected to suffer from reductions in capital expenditure, which had been increased in 2018. The decrease in these expenses should lead to increased payment delays for construction companies, and potential corporate insolvencies.


Regarding consumption, on the one hand given the political and social context, social benefits are likely to be safeguarded, and therefore continue to support private consumption. This latter will also benefit from lower inflation (thanks to lower food prices). On the other hand, the growth of consumption will be constrained by high unemployment, while political unrest (which leads to the closure of shops on protest days) is expected to hamper economic activity.


Substantial twin deficits

In 2019, the budget deficit will remain large and threatens to widen even further. While the increase in customs duties should result in an increase in non-oil revenues, those related to hydrocarbons (about 45% of budgetary revenues) should be penalized by the difficulties in the sector. Given the social unrest, recurrent expenditure and social transfers are expected to increase at the expense of capital expenditure. With the government indicating at the end of June 2019 that it wished to turn the page on the "non-conventional financing" initiated at the end of 2017 (monetary creation process), and in the absence of new taxes, the Treasury could potentially turn to external borrowing, which is currently a marginal share of Algeria's low debt.


After contracting sharply in 2018, thanks notably to import control measures that led to the reduction of the large trade deficit, the current account deficit is expected to remain high. The import bans on a list of 851 products were replaced in September 2018 by a new tariff mechanism that will continue to limit imports, but export earnings are expected to increase even more slowly. The trade deficit is therefore expected to widen. Despite a surplus in the transfer account, the current balance will also be affected by the deficit in the invisible and income balances. The current account deficit is expected to continue to be financed by the drawdown of foreign exchange reserves (which represented about 17 months of imports at the end of 2018). As a result, they are expected to further erode, which they have done almost constantly since 2014.


A transition with an undecided outcome

After nearly 20 years of presidency, Abdelaziz Bouteflika was forced to resign on April 2, 2019 in the face of a large-scale popular mobilization calling for a regime change which began in February 2019. While the Constitution provides for presidential elections (initially scheduled for 18 April) to be held within 90 days of the resignation, the Constitutional Court ruled that it was not feasible to hold them on the announced date of July 4. While the 90-day deadline has passed, Abdelkader Bensallah, as Speaker of the Upper House of the Parliament, continues to serve as interim Head of State. Despite the departure of former President Bouteflika, demonstrators continue to mobilize en masse in order to demand the departure of all the symbols of the system that has governed the country since 1999 and the advent of a second republic. General Ahmed Gaïd Salah, a key player in Mr Bouteflika's departure and a representative of the military, is also playing a role in the transition, notably by initiating the "Clean Hands" operation: a vast anti-corruption campaign. Despite the arrests of prominent political figures, welcomed by some of the public, there are those who doubt the sincerity of the approach, openly accusing General Gaïd Salah of wanting to establish a military regime with a civilian showcase. President Bensallah, who was re-appointed head of state on July 9 after his interim term in office expired, did propose a roadmap for new presidential elections, but as no single figure truly represents the movement, it seems difficult to implement at this moment in time. The country's traditional opposition is divided on the objectives of the transition. This political uncertainty is therefore likely to persist in the coming months, hindering policymaking.



Last update: August 2019