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

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Algerian economy is mainly driven by hydrocarbons and public investment. Hydrocarbons account for 40% of GDP, 94% of exports and one third of fiscal revenues. Algeria’s economic growth was already weakened by the negative trend in hydrocarbon production and prices, the lack of economic diversification and political uncertainty before the outbreak of COVID-19 pandemic. In 2020, GDP contracted by an estimated -4.9% (IMF), hit by the additional shock of the health crisis. Higher oil prices and strong European demand for gas supported the recovery in 2021. According to IMF estimates, GDP growth rebounded to 3.4% in 2021, and is expected to slow down to 1.9% in 2022 and 1.7% in 2023. Tougher base effect and tighter fiscal policy explain this slower activity (Focus Economics). Oil prices volatility, the apparition of new virus variants and social and geopolitical tensions are the main downside risks to the outlook (IMF).

Algeria’s economy was hardly hit by the combined effect of declining hydrocarbon revenues and the COVID-19 pandemic. It started to recover in 2021 thanks to the relaxation of containment measures and a rebound in hydrocarbon prices and production, but the crisis has increased Algeria’s ongoing economic vulnerabilities. Continued large fiscal and external current account deficits have reduced policy space as public debt increased significantly and international reserves declined (IMF). Budget deficit reached an estimated -11.8% GDP in 2021, and is forecast to remain at that high level in 2022 (IMF). Public debt is soaring, estimated at 58.5% GDP in 2021, 63.2% GDP in 2022 and 68.2% GDP in 2023 (IMF). Algeria’s external debt level is at low levels but could increase in the event of adverse shocks or increased fiscal deficits (Euler Hermes). International reserves are depleted. At the end of 2021, foreign exchange reserves stood at USD 43 billion, covering around 11 months of imports. The IMF is expecting a continued depletion of international reserves to USD 12 billion (only 3 months of import coverage) by 2026 (Euler Hermes). Inflationary pressures have intensified since the end of 2020 due to higher international food prices and an episode of drought. Estimated at 6.5% in 2021, it is forecast to increase to 7.6% in 2022 and to decrease slightly to 6.3% in 2023 (IMF). The authorities are following a gradual and sustained fiscal consolidation, adjusted to the evolution of the pandemic and to domestic economic conditions. 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. The country is looking for ways to reduce its dependence on gas for power generation by investing in solar energy.

According to IMF estimates, unemployment hit 14.1% of the population in 2021, and will further increase to 14.7% in 2022 and 15.5% in 2023. Employment and purchasing power deteriorated drastically since the Covid-19 crisis. According to the World Bank, unemployment is highest among youth, women and graduates due to skills mismatch in the labour market. There are also big differences between living conditions in cities and rural areas. Instability caused by radical groups on Algeria's borders remains a risk factor.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 171.07e147.60e163.81168.20172.09
GDP (Constant Prices, Annual % Change) 0.8e-4.9e3.41.91.7
GDP per Capita (USD) 3,940e3,337e3,6383,6723,697
General Government Gross Debt (in % of GDP) 45.855.6e58.563.268.2
Inflation Rate (%) 2.02.4e6.57.66.3
Unemployment Rate (% of the Labour Force) 11.414.0e14.114.715.5
Current Account (billions USD) -16.96-18.71e-12.49-9.19-9.08
Current Account (in % of GDP) -9.9-12.7e-7.6-5.5-5.3

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

 

Main Sectors of Industry

Agriculture accounts for 14.1% of GDP and employs 10% of the workforce (World Bank, 2020). The main crops are wheat, barley, oats, citrus, wine grapes, olives, tobacco and dates. Algeria produces a large quantity of cork and is an important livestock farmer. In late 2020, the government introduced a 2020-2024 roadmap strategy to develop the soft wheat, maize, sugar and oilseeds sectors with the aim to reduce the annual food import bill (FAO). The primary sector was the most resilient to the Covid-19 pandemic.

The size of the industry represents 20.3% of GDP, employing 30% of the active population. The oil and gas sector accounts for most of the federal income and almost all of its export income (over 90% of total exports). Algeria is among the top five 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 products, chemical products, metals and construction materials. Oil was the one most affected by COVID-19 crisis. The manufacturing sector has also been severely affected due to temporary plant closures, workers' lock-downs and the paralysis of national and international supply chains. In particular, demand has fallen in key sectors such as automotive and textiles.

The tertiary sector contributes to 48.7% of GDP and employs 60% 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 1600 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) 9.6 30.4 60.0
Value Added (in % of GDP) 14.2 34.2 47.8
Value Added (Annual % Change) 1.6 -7.3 -5.3

Source: World Bank, Latest available data.

 

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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

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

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: Ayman Benabderrahmane (since 7 July 2021)
Next Election Dates
Presidential: 2024
Council of the Nation: NA
National People's Assembly: 2026
Current Political Context
The announcement of Abdelaziz Bouteflika’s candidacy for a 5th presidential term has led to massive and peaceful popular mobilisation for the departure of the "ancient establishment". Faced with the contestation, Bouteflika announced in March the postponement of the presidential election, his decision not to run for a 5th term and then his resignation (April 2). Elected on 12 December 2019 with 58.51% of the votes cast, Abdelmajid Tebboune responded to weekly peaceful protests (‘Hirak’) by promulgating a revised Constitution, adopted by referendum on 1 November 2020. It includes more transparent elections and the management of public funds. However, the domestic political situation became increasingly tense in the context of the approaching snap elections held in June 2021. With only 23% of participation, the election saw the lowest turnout of those held for the legislature in Algerian history. Following the resignation of Prime Minister Abdelaziz Djerad, Finance Minister Ayman Benabderrahmane was appointed as prime minister. On the international scene, tensions have increased between Algeria and Morocco. Extremists groups from neighbouring Mali, Libya and Niger are also a threat to political stability in Algeria.
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
  • Green Algeria Alliance: Islamist coalition formed in 2012; aims to address the Government’s perceived lack of commitment to reform, comprises several movements including the Movement of Society for Peace (Hamas), Islamic Renaissance Movement (Ennahda) and the Movement for National Reform (Islah).
  • Workers' Party: Trotskyist political party in Algeria

During the 2019 presidential elections, FLN candidate had 58.13% of the votes, MRI - FJD - Al Binaa candidate had 17.37%, Avant-Garde des Libertés candidate 10.55%, RND candidate 7.28% and Front El Moustakbal candidate had 6.67%. Some parties boycotted the 2019 presidential elections.

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 elected by direct universal suffrage for five years. He appoints the Prime Minister and the Government at the suggestion of the Prime Minister. The Prime Minister sets the jamount of the State's expenses and revenue and prepares some bills.
The Parliament passed a constitutional reform at the beginning of 2016, which reinstated a two-term limit for the presidency. Following this reform, the President must also consult with the Parliament when choosing the Prime Minister.
Legislative Power
Parliament is bicameral and composed of the Council of the Nation and the National Popular Assembly. Senators are elected by indirect universal suffrage for six years (renewable every three years). Deputies (MPs) are elected by direct universal suffrage. They examine successively bills and proposals of laws, vote laws and monitor the Government. The Parliament passed a constitutional reform at the beginning of 2016, which increased its powers.
 

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

Source: World Press Freedom Index, Reporters Without Borders

 

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

COVID-19 epidemic evolution

To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Algeria, please visit the website DZ-Covid19 (in Arabic), which includes data on the geographical distribution of the epidemic in the country. Furthermore, daily reports can be accessed on the website of the Ministry of Health (in French).
For the international outlook you can consult the latest
situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.

Sanitary measures

To find out about the latest public health situation in Algeria and the current sanitary measures in vigour, please visit the official COVID-19 portal of the Ministry of Health (in French and Arabic).
Further information can be sourced on the website of the
Ministry of Health (in French and Arabic).

Travel restrictions

The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.

Import & export restrictions

For the up-to-date information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the website of the Algerian Customs Authority.
For further information on the temporary trade measures adopted by Algeria,
please consult the section dedicated to Algeria on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

For the information on the economic recovery scheme put in place by the Algerian government to address the impact of the COVID-19 pandemic on the national economy, please visit the website of the Ministry of Finance (in French and Arabic). For a summary in English of the specific economic and fiscal measures adopted by the government, consult the dedicated page from KPMG.
For updates on the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Algerian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Algeria in the
IMF’s Policy Tracker platform.

Support plan for businesses

For an overview of the fiscal measures taken by the Algerian government to help businesses to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult dedicated page on the Ministry of Finance website (in French). The Large Companies Department (DGE) provides information about the economic measures that apply to the companies that fall within its scope of activity.
For a general overview of international SME support policy responses to the COVID-19 outbreak 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.

Support plan for exporters

For the updated information on specific programs in support of Algerian exporting companies put in place by the national government following the COVID-19 epidemic, if applicable, please consult the website of the national Ministry of Commerce (in French and Arabic).

 

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Latest Update: June 2022