Panorama econòmic

Economic indicators

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.

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