Algeria Economic Outlook

  • Growth reached an estimated 3.9% in 2015, mostly driven by agriculture and a rebound in oil and gas activity.
  • With approximately 49% of government revenues and 96% of exports depending on the oil sector, the drop in oil prices has reduced budgetary and external savings, underscoring the need to diversify the sources of public finance.
  • A process of urban transition begun in 1987-88 has led to 70% of the population’s 40 million people living in urban areas by 2015.

Real gross domestic product (GDP) growth in 2015 was 3.9%, against 3.8% in 2014, driven mostly by agriculture, especially vegetable production, and by a noticeable rebound in oil and gas activity in Q4 of 2015. Against a background of falling global oil prices since June 2014, this rebound followed nine consecutive years of decline. This should be an opportunity to speed up reforms aimed at diversifying the economy and its structural transformation. Real GDP growth should reach 3.4% and 3.0% in 2016 and 2017 respectively.

Rising prices of food and manufactured goods pushed up inflation, which had declined for two consecutive years, to 4.8% in 2015. The price hikes were due to problems in the distribution channels, especially for fresh agricultural produce and industrial foodstuffs.

The economic situation is mostly dominated by the drastic fall in oil prices and its effects on the country’s external position, as well as on public accounts. For the first time in 16 years, in 2015 the trade balance was negative (-9% of GDP) because imports (31% of GDP) were not covered by exports (21% of GDP), resulting in lower official foreign-exchange reserves.

Public accounts have been affected by erosion in the resources of the revenue-stabilisation fund (Fonds de regulation des recettes) from the notable fall in oil-taxation receipts, down from 20% to 13% of GDP between 2014 and 2015. With total revenues falling (27% of GDP in 2015 versus 33% in 2014) and fiscal expenditure still high (43% of GDP in 2015 and 2014), the overall deficit grew to 16% of GDP in 2015 from 8.3% in 2014.

Regional planning has systematically included “urban” and “sustainability” as concepts in the regulations and development plans for the three major zones: Littoral, High Plateaux and Sahara. In 2015, more than 70% of the country’s population of 40 million lived in urban areas.