Economic and Political Overview

flag Algeria Algeria: Economic and Political Overview

In this page: Economic Outline | Political Outline | COVID-19 Country Response

 

Economic Outline

Economic Overview

The Algerian economy is mainly driven by hydrocarbons and public investment, with the former accounting for 40% of GDP, 94% of exports and one-third of fiscal revenues. In 2022, the country benefited from high energy prices and the increased demand from Europe that followed the EU sanctions against Russia, resulting in a GDP growth of 3.2%. The positive trend continued in 2023, when economic growth reached 4.2%, underpinned by robust activity in the hydrocarbon, industry, construction, and services sectors. For 2024 and 2025, GDP growth is forecasted to decelerate marginally to 3.1% and 2.5%, respectively, amid lower hydrocarbon prices (IMF). Private consumption, constituting 42% of GDP, is anticipated to make a positive contribution, largely sustained by government-introduced social support measures for households.

In recent years, continued large fiscal and external current account deficits have reduced policy space as public debt increased significantly and international reserves declined (IMF). During 2022 and 2023, the windfall hydrocarbon revenues failed to counterbalance the additional expenditures aimed at supporting the economy, resulting in a continual widening of the government deficit, which stood at 9% of GDP last year. Among the top-priority expenditures, the government plans to fund a 47-50% raise in public sector workers' salaries from 2023 to 2024, an augmentation in retirement allowances for the least affluent, an expansion of unemployment benefits, and a doubling of the defence budget, which will result in high deficits in 2024 (6.8%) and 2025 (6.3%) as per the IMF. The debt-to-GDP ratio was estimated at 55.1% in 2023 (from 55.6% one year earlier) and is expected to follow an upward trend over the forecast horizon, reaching 63.9% by 2025. The average annual inflation remained high at 9% in 2023, driven primarily by elevated prices of fresh food. Despite an appreciation in the exchange rate, which has helped mitigate imported inflation, monetary policy remains accommodative. In April, the central bank increased reserve requirements and intensified liquidity absorption in the banking sector, but inflationary pressures persist. The new Government Action Plan comprises a wide range of reforms to support the transition towards a more diversified and sustainable economy and bolster governance and social cohesion, for example focusing on the mining sector (iron, phosphate). Moreover, the country is looking for ways to reduce its dependence on gas for power generation by investing in solar energy.

According to the World Bank’s estimates, unemployment hit 11.6% of the population in 2022 (latest data available). Unemployment is highest among youth, women and graduates due to skills mismatch in the labour market. Algeria has a low GDP per capita, estimated at USD 13,682 in 2023 by the IMF (PPP). There are also big differences between living conditions in cities and rural areas, and instability caused by radical groups on Algeria's borders remains a risk factor.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 195.06224.11239.21247.74255.32
GDP (Constant Prices, Annual % Change) 3.23.83.12.51.9
GDP per Capita (USD) 4,3074,8755,1305,2435,336
General Government Gross Debt (in % of GDP) 55.655.158.863.968.1
Inflation Rate (%) n/a9.06.86.35.9
Unemployment Rate (% of the Labour Force) 0.00.00.00.00.0
Current Account (billions USD) 19.066.532.34-3.74-7.75
Current Account (in % of GDP) 9.82.91.0-1.5-3.0

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

 

Main Sectors of Industry

Agriculture accounts for 11.6% of Algeria’s GDP and employs 10% of the workforce (World Bank, latest data available). The main crops are wheat, barley, oats, citrus, wine grapes, olives, tobacco and dates. Algeria also produces a large quantity of cork and is an important livestock farmer. In late 2023, the government introduced the “Strategic plan for the development of cereal production in Algeria 2023-2028”, aimed at developing the soft wheat, maize, sugar and oilseeds sectors to reduce the annual food import bill. National wheat production was anticipated at 2.5 million tonnes in 2023, approximately 17% lower y-o-y. The total cereal production was estimated at 3.6 million tonnes, marking a 12% decrease from the prior year, which was already impacted by adverse weather conditions. Overall, the 2023 harvest was more than 20% below the five-year average as the country faced a third consecutive drought season (FAO).

The secondary sector represents 45.9% of GDP, employing 31% of the active population. The oil and gas sector accounts for most of the federal income and almost all of its export income (it represents over 90% of total exports). Algeria is among the top ten largest gas exporters in the world, it ranks 16th in oil reserves and 10th in confirmed gas reserves. The ores mined in large quantities are iron, lead, phosphate, uranium, zinc, salt and coal. The main activities of the manufacturing sector are industrial food processing, textile and chemical products, metals and construction materials. The manufacturing sector alone accounts for 35% of GDP (World Bank). Figures from the Ministry of Industry show that in the two first quarters of 2023, the public industrial sector recorded a growth rate of over 5.6% and 1,3% y-o-y, respectively.

The tertiary sector contributes to 38.6% of the GDP and employs 59% of the workforce. Algeria's banking sector is dominated by public banks, which suffer from high levels of non-performing loans to state-owned enterprises. Of the 20 banks operating in Algeria, six state-run banks retain the lion’s share of the market. With over 1,600 km of Mediterranean coastline, important cultural and historical sites, and the striking desert landscapes of the Sahara, Algeria has long held considerable potential for tourism. Nevertheless, the sector still accounts for a small part of GDP.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 10.3 31.0 58.6
Value Added (in % of GDP) 11.4 42.3 42.2
Value Added (Annual % Change) 4.0 1.7 4.1

Source: World Bank, Latest data available.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
49,7/100
World Rank:
162
Regional Rank:
13



 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
4.47/10
World Rank:
76/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.

 

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Political Outline

Current Political Leaders
President-elect: Abdelmadjid Tebboune (since 19 December 2019)
Prime Minister: Nadir Larbaoui (since 11 November 2023)
Next Election Dates
Presidential: 2024
Council of the Nation: 2025
National People's Assembly: 12 June 2026
Current Political Context
Abdelmajid Tebboune, Bouteflika's prime minister in 2017, has been in charge as President since December 2019. Since then, Algeria's outlook for government stability has enhanced, following weekly nationwide anti-government protests demanding substantial political system reforms. The Hirak protest movement, the primary opposition force for a decade, was effectively neutralized by three waves of the COVID-19 pandemic. Additionally, President Abdelmadjid Tebboune's government implemented popular policies, contributing to economic revitalization, further supported by a favourable commodity cycle.
Algerian economic diplomacy obtained various successes in recent years, particularly in relation to the country’s hydrocarbon exports to Europe. Nevertheless, in 2023, the North African country's application to join the BRICS was rejected: Algeria did not make it into the initial list of five candidate countries for future integration into the BRICS, despite Russia's support. Among the reasons for the refusal were the lack of industrialization, the absence of economic diversification, or concrete state projects to revitalize the industrial fabric; the absence of a banking system befitting the mission of economic growth and an outdated fiscal system. Moreover, Algeria has been identified as a vulnerable country due to its distance from nations engaged in the energy transition.
Main Political Parties

Following liberalisation of the electoral law in 1997, dozens of political parties entered the parliamentary sphere. Still, most political power is concentrated in the President-backed National Liberation Front (FLN).

  • National Liberation Front (FLN): left-wing, secures about half of parliamentary seats; previously the only legally permitted party
  • National Rally for Democracy (RND): centrist, liberal; initially created by the military as an alternative party, but still remains closely aligned to the FLN
  • Future Front (FM): centrist, nationalist
  • National Construction Movement (Binaa): Islamic democracy, Algerian nationalism

The main opposition parties include:

  • Movement of Society for Peace (MSP): Sunni Islamism, Islamic democracy, aligned with the international Muslim Brotherhood
  • People's Voice Party (PVP): led by Lamine Osmanie, a former member of the Algerian National Front
  • Justice and Development Front (FJD): right-wing, inspired by the Turkish Justice and Development Party (AKP).
Type of State
Algeria is a constitutional representative democracy. It is based on a multi-party semi-presidential regime.
Executive Power
The President of the Republic is the Head of State. He is directly elected by direct universal suffrage by absolute majority in two rounds if needed for a 5-year term (renewable once). He appoints the Prime Minister after consultation with the majority party in the Parliament and the Government at the suggestion of the Prime Minister. The Prime Minister sets the amount of the State's expenses and revenue and prepares some bills.
Legislative Power
Parliament is bicameral and composed of the Council of the Nation (Majlis al-Umma) and the National Popular Assembly (al-Majlis al-Sha'abi al-Watani). The Council (upper house) has 174 seats, 96 members are indirectly elected in secret ballot (2/3) and 58 are appointed by the President of the Republic (1/3). Its members serve a six-year term with one-half of the membership renewed every 3 years. The Assembly (lower house) has 407 members directly elected by the population to serve 5-year terms, of which 8 are elected among Algerians living abroad.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
146/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free
Political Freedom:
6/7
Civil Liberties:
5/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
ent, consult the dedicated page on the KPMG website.
For updates on the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) undertaken by the Algerian government, please consult the country's dedicated section in the IMF’s Policy Tracker platform.

Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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Latest Update: April 2024