| Recent macroeconomic and financial developments |
| Economic growth rate accelerated from 3.6% in 2022 to 4.2% in 2023, driven by the hydrocarbon sector, industry, construction, and services. Inflation remained high (9.3% versus 9.2% in 2022) due to rising food prices. Monetary policy remained accommodative despite the central bank’s decision in April 2023 to increase reserve requirements and accelerate liquidity absorption in the banking sector. |
| The budget deficit worsened, from 7.8% of GDP in 2022 to 10.2% in 2023, reflecting higher wage and pension payments for civil servants. Budget revenue rose around 5% from 2022, despite a slight drop in oil revenue. Public debt, mainly domestic, fell from 62.1% of GDP in 2021 to 55.1% in 2023. The external current account surplus narrowed substantially, from 8.6% of GDP in 2022 to 2.3% in 2023, leading to a drop in foreign exchange reserves from 18 months of import cover to 14 months. A new monetary and banking law was passed to stimulate financial innovation and inclusion and modernize financial supervision tools. The first two Algerian banks to open branches abroad were the Algerian Union Bank in Mauritania and the Algerian Bank of Senegal. |
| Unemployment remains high at 14.9% in 2022 and 14.5% in 2021. Since 2021, the government has instituted an unemployment benefit scheme, increasing the monthly amount to around $110 in December 2022. |
| Outlook and risks |
| Real GDP growth is projected to continue at around 4% in 2024 and then slow to 3.7% in 2025. The hydrocarbon sector is expected to maintain its growth, with oil and natural gas exports growing at around 5% in 2024 and 2025. The upward trend in inflation is projected to reverse in 2024, falling to 6.8% in 2024 and 5.7% in 2025 as agricultural production increases. The budget deficit is projected to deteriorate to 11.1% of GDP in 2024 and 12% in 2025, under pressure from social spending, which is set to continue rising. The current account is projected to benefit from global disruptions to hydrocarbon supplies and remain in surplus, at 1.0% of GDP in 2024. The presidential election to be held in September 2024 is not considered a macroeconomic risk, given the stability of the national sociopolitical context. If the elections go well, the main risk for the economic outlook is the country’s heavy dependence on the hydrocarbon sector. |
| Reform of the global financial architecture |
| Economic growth depends heavily on the performance of the oil and natural gas sectors. Nevertheless, the share of hydrocarbons in GDP has been declining, from 44.3% in 2005 to 34.2% in 2012 and 19.5% in 2019, while that of services has been rising. The nonhydrocarbon industry’s share of GDP has also been declining, from almost 15% in the early 1980s to 5.9% of GDP over 2015–19. Agriculture’s share of GDP fell from 14% over 1990–99 to 10% over 2000–09 and then rose to 13% over 2010–16. By contrast, market services are on the rise, with their contribution to GDP rising from 25% in 2000–09 to 31% in 2010–16. The services sector’s share of employment doubled from 13% in 2010 to 26% in 2018, while agriculture’s share was almost halved, from 20.1% in 1990 to 10.4% in 2018. |
| The main development challenge remains the need to diversify its economy. Reforming the mechanisms of the global financial architecture would be in line with the government’s vision of consolidating economic recovery and improving the business climate by accelerating the digital transition and developing the sectors driving development and economic growth, including agro-industry and fisheries. In the short term, it will be necessary to support local industries and invest in the technologies required for the industrialization strategy (digital economy and digitalization in particular). |
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| Algeria: Economic Outlook GDP |
