Economy of Algeria

The total imports and exports on the eve of the French invasion (in 1830) did not exceed £175,000. By 1850, the figures had reached £5,000,000; in 1868, £12,000,000; in 1880, £17,000,000; and in 1890, £20,000,000. From this point progress was slower and the figures varied considerably year by year. In 1905 the total value of the foreign trade was £24,500,000. About five-sixths of the trade is with or via France, into which country several Algerian goods have been admitted duty-free since 1851, and all since 1867. French goods, except sugar, have been admitted into Algeria without payment of duty since 1835. After the 1892 increase of the French minimum tariff which applied to Algeria for the first time, foreign trade greatly diminished.

GDP per capita grew 40% in the 1960s, reaching a peak growth of 538% in the 1970s.[18] Growth collapsed to 9.7% in the turbulent 1980s. Failure of timely reforms by successive governments caused the current GDP per capita to shrink by 28% in the 1990s.

This is a chart of trend of gross domestic product of Algeria at market prices estimated by the International Monetary Fund.

For purchasing power parity comparisons, the US dollar is exchanged at 70.01 Algerian dinars only (updated May 24, 2007). Average wages in 2007 hover around US$18–22 per day.

East-West Highway near Relizane

Burdened with a heavy foreign debt, Algiers concluded a one-year standby arrangement with the International Monetary Fund in April 1994 and the following year signed onto a three-year extended fund facility which ended 30 April 1998. In March 2006, Russia agreed to erase $4.74 billion of Algeria's Soviet-era debt during a visit by President Vladimir Putin to the country, the first by a Russian leader in half a century. In return, president Abdelaziz Bouteflika agreed to buy $7.5 billion worth of combat planes, air-defence systems and other arms from Russia, according to the head of Russia's state arms exporter Rosoboronexport.[19][20]

Some progress on economic reform, Paris Club debt reschedulings in 1995 and 1996, and oil and gas sector expansion contributed to a recovery in growth since 1995, reducing inflation to approximately 1% and narrowing the budget deficit. Algeria's economy has grown at about 4% annually since 1999. The country's foreign debt has fallen from a high of $28 billion in 1999 to its current level of $5 billion. The spike in oil prices in 1999–2000 and the government's tight fiscal policy, as well as a large increase in the trade surplus and the near tripling of foreign exchange reserves has helped the country's finances. However, an ongoing drought, the after effects of the floods of 10 November 2001 and an uncertain oil market made prospects for 2002-03 more problematic. The government has pledged to continue its efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector.

Hotel Zianides in Tlemcen.

President Bouteflika has announced sweeping economic reforms, which, if implemented, will significantly restructure the economy. Still, the economy remains heavily dependent on volatile oil and gas revenues. The government has continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector, but has had little success in reducing high unemployment and improving living standards. Other priority areas include banking reform, improving the investment environment, and reducing government bureaucracy.

The government has announced plans to sell off state enterprises: sales of a national cement factory and steel plant have been completed and other industries are up for offer. In 2001, Algeria signed an Association Agreement with the European Union. In June 1987, Algeria started accession negotiations for entry into the World Trade Organization, but negotiations ceased in 2014.

In the 2000s the country enjoyed several years of strong economic performance, with solid non-hydrocarbon growth, low inflation, an overall budget surplus and a positive trade balance.

The following table shows the main economic indicators in 1980–2017. Inflation under 5% is in green.[21]

Year	GDP (in bil. US$ PPP)	GDP per capita (in US$ PPP)	GDP growth (real)	Inflation rate (in Percent)	Unemployment (in Percent)	Government debt (in % of GDP)
1980	86.6	4,641	−5.4 %	9.7 %	15.8 %	n/a
1981	97.6	5,069	3.0 %	14.6 %	15.4 %	n/a
1982	110.2	5,550	6.4 %	6.7 %	15.0 %	n/a
1983	120.8	5,887	5.4 %	7.8 %	14.3 %	n/a
1984	132.1	6,237	5.6 %	6.3 %	16.5 %	n/a
1985	143.9	6,483	5.6 %	10.4 %	16.9 %	n/a
1986	146.5	6,427	−0.2 %	14.0 %	18.4 %	n/a
1987	149.2	6,377	−0.7 %	5.8 %	20.1 %	n/a
1988	151.5	6,287	−1.9 %	5.9 %	21.8 %	n/a
1989	165.0	6,679	4.8 %	9.2 %	18.1 %	n/a
1990	172.4	6,891	0.8 %	9.3 %	19.8 %	n/a
1991	176.0	6,865	−1.2 %	25.9 %	20.3 %	77.8 %
1992	182.9	6,963	1.6 %	31.7 %	21.4 %	62.9 %
1993	183.3	6,817	−2.1 %	20.5 %	23.2 %	74.0 %
1994	185.6	6,749	−0.9 %	29.0 %	24.4 %	98.4 %
1995	196.7	7,011	3.8 %	29.8 %	28.1 %	116.2 %
1996	207.9	7,279	3.8 %	18.7 %	28.0 %	98.1 %
1997	213.8	7,361	1.1 %	5.7 %	28.0 %	69.9 %
1998	227.1	7,698	5.1 %	5.0 %	28.0 %	72.9 %
1999	238.0	7,943	3.2 %	2.6 %	29.3 %	82.0 %
2000	252.7	8,282	3.8 %	0.3 %	29.5 %	62.8 %
2001	266.2	8,599	3.0 %	4.2 %	27.3 %	54.3 %
2002	285.4	9,085	5.6 %	1.4 %	25.7 %	51.3 %
2003	312.1	9,787	7.2 %	4.3 %	23.7 %	42.1 %
2004	334.4	10,332	4.3 %	4.0 %	17.7 %	35.2 %
2005	365.5	11,126	5.9 %	1.4 %	15.3 %	26.3 %
2006	383.1	11,488	1.7 %	2.3 %	12.5 %	23.6 %
2007	406.6	12,008	3.4 %	3.7 %	13.8 %	13.5 %
2008	424.3	12,267	2.4 %	4.9 %	11.3 %	8.0 %
2009	434.5	12,321	1.6 %	5.7 %	10.2 %	9.8 %
2010	455.8	12,668	3.6 %	3.9 %	10.0 %	10.5 %
2011	478.3	13,027	2.8 %	4.5 %	10.0 %	9.3 %
2012	503.6	13,431	3.9 %	8.9 %	11.0 %	9.3 %
2013	526.1	13,737	2.8 %	3.3 %	9.8 %	7.6 %
2014	555.9	14,212	3.8 %	2.9 %	10.6 %	7.7 %
2015	582.7	14,581	3.7 %	4.8 %	11.2 %	8.8 %
2016	609.6	14,955	3.3 %	6.4 %	10.5 %	20.6 %
2017	632.9	15,237	2.0 %	5.6 %	11.7 %	25.8 %

In 2023 Algeria's nominal GDP is estimated to be US$224.10 billion. Using purchasing power parity, estimated GDP was US$628.99 billion, or US$13,680 on a per capita basis. The estimated real growth rate is 2.6%, down from 3.4% in 2022.[3] In 2017 industry accounted for 39.3%% of GDP, services constituted 47.4%, and agriculture provided the remaining 13.3%.[4]

After having virtually eliminated external debt before 2013, the drop hydrocarbon prices and revenues has led to a large budget deficit which has been only partly offset by spending cuts. Consequently, government debt has increased to more than 30% of GDP.[22] Inflation has remained at 3-6% on average for 2013–17. However, the economy remains highly dependent on hydrocarbons, which represent 89% of total exports;[13] a continued slowdown of global energy demand has significantly put pressure on Algeria's fiscal and external positions.[23]

In 2007, government revenues of US$58.5 billion exceeded expenditures of US$41.4 billion. Receipts from the hydrocarbons industry usually account for roughly 60% of revenues.[24]

Algeria's economy includes a significant public sector built up under a policy of import substitution industrialization which remained intact after other developing nations liberalised their economies under the influence of structural adjustment programmes advocated by the World Bank and the International Monetary Fund towards the end of the 20th century. As of 2019, this sector consisted of 400 publicly owned firms, and generates a third of the state's revenue. Although economic liberalisation has advocates in Algeria, in 2018 froze all plans to pursue privatisation.[25]

In addition, the social safety net in Algeria is stronger than in other countries in the region: it saw periods of expansion in the 1970s, and in the 2000s, helping to build stability after the Civil War. It is supplemented by consumer subsidies. These measures allow for wages to be kept low.[25]

The restrictive political economy in Algeria and continued adherence to the ISI model has limited foreign direct investment in the country: Algeria has one of the lowest levels of FDI in Africa. However, local businesses have benefited from the state undertaking public works projects in the construction of roads, ports, dams and housing. Both fixed capital formation and credit extended to the private sector increased during the 2010s.[25]

Algeria's currency is the Algerian dinar (DZD). The dinar is loosely linked to the U.S. dollar in a managed float. Algeria's main export, crude oil, is priced in dollars, while most of Algeria's imports are priced in euros. Therefore, the government endeavors to manage fluctuations in the value of the dinar. As of April 2008, US$1 was equivalent to about DZD 64.6.[33]

Algeria's foreign currency reserves have grown rapidly since 2000, reflecting rising prices for exported oil. At the end of 2007, foreign reserves totaled US$99.3 billion, up from US$12 billion in 2000 and the equivalent of almost four years of imports.[33] In 2007 the estimated inflation rate was 4.6 percent.[24]

In 2010, the IMF voiced concerns about poor management of Algeria's monetary system and inflation.[34]

In April 2014, a report focusing on world economic projections was published by the IMF, according to which it was predicted that, in 2015, Algeria's economic growth would fall by 1.5%, while unemployment would rise by 1.2%.[35]

The largest employer is government, which claims 32 percent of the workforce. Even though industry is a much larger part of the economy than agriculture, agriculture employs slightly more people (14 percent of the workforce) than industry (13.4 percent of the workforce). One of the reasons for this disparity is that the energy sector is very capital-intensive. Trade accounts for 14.6 percent of the workforce, while the construction and public works sector employs 10 percent, reflecting the government's efforts to upgrade the country's infrastructure and stock of affordable housing.[36]

Unemployment has remained at levels around 10% since 2010 but is significantly higher for youth (24.8%) and women (16.3%)[37]

At the end of 2006, the unemployment rate was about 15.7 percent, but the rate among those under the age of 25 was 70 percent. In 2005 the labor participation rate was only 52 percent, versus an Organisation for Economic Co-operation and Development average of 70 percent. New entrants to the workforce and the lack of emigration options make unemployment a chronic problem and an important challenge to the government. Given its highly capital-intensive nature, the hydrocarbons industry is not in a position to employ many job seekers.[36]

Algeria is seeking more trade and foreign investment. For example, the hydrocarbons law passed in April 2005 is designed to encourage foreign investment in energy exploration. Increased production could raise Algeria's profile as a member of the Organization of the Petroleum Exporting Countries. In keeping with its pro-trade agenda, Algeria achieved association status with the European Union (EU) in September 2005. Over a 12-year period, the association agreement is expected to enable Algeria to export goods to the EU tariff-free, while it gradually lifts tariffs on imports from the EU. Algeria has signed bilateral investment agreements with 20 different nations, including many European countries, China, Egypt, Malaysia, and Yemen. In July 2001, the United States and Algeria agreed on a framework for discussions leading to such an agreement, but a final treaty has not yet been negotiated. Ultimately, trade liberalization, customs modernization, deregulation, and banking reform are designed to improve the country's negotiating position as it seeks accession to the World Trade Organization.[38]

In 2007 Algerian imports totaled US$26.08 billion. The principal imports were capital goods, foodstuffs, and consumer goods. The top import partners were France (22 percent), Italy (8.6 percent), China (8.5 percent), Germany (5.9 percent), Spain (5.9 percent), the United States (4.8 percent), and Turkey (4.5 percent). In 2007 Algeria exported US$63.3 billion, more than twice as much as it imported. Exports accounted for 30 percent of gross domestic product (GDP). Hydrocarbon products constituted at least 95 percent of export earnings. The principal exports were petroleum, natural gas, and petroleum products. The top export partners were the United States (27.2 percent), Italy (17 percent), Spain (9.7 percent), France (8.8 percent), Canada (8.1 percent), and Belgium (4.3 percent). Algeria supplies 25 percent of the European Union's natural gas imports. In 2007 Algeria posted a positive merchandise trade balance of US$37.2 billion. In 2007 Algeria achieved a positive current account balance of US$31.5 billion. High prices for Algeria's energy exports are the main driver for the improvement in the current account balance.[38]

Algeria's trade surplus for 2010 rose to over $83.14 billion. The Algerian Centre for Information and Statistics Directorate of the Algerian Customs attribute this increase from the previous year to higher fuel revenue due to higher prices for a barrel of oil, and a slight decrease in imports of consumer non-food materials. The center said that Algerian exports rose by 78.26% during the period from January to November 2010 from $27.51 billion to $44.4 billion during the same period in 2009. Imports grew by 89.1% from $43.36 billion to $76.35 billion between 2009 and 2010.[39]

Reflecting strong oil export revenues, external debt is on a downward trajectory. For example, these revenues facilitated early repayments of US$900 million in loans from the African Development Bank and Saudi Arabia. In March 2006, Algeria's purchase of 78 aircraft from Russia led to the cancellation of Algeria's entire debt to Russia. In 2006 external debt was estimated at US$4.4 billion, down from US$23.5 billion in 2003.[38]

In 2006 foreign direct investment (FDI) in Algeria totaled US$1.8 billion. The petrochemical, transport, and utilities sectors have been recent beneficiaries of FDI. FDI into the oil sector was expected to rise as a result of a hydrocarbons law, approved in April 2005, that created a more even playing field for foreign oil companies to compete with Algeria's state-owned oil company, Sonatrach, for exploration and production contracts. Algeria also is seeking foreign investment in power and water systems.[38]

As of August 2006, cumulative World Bank assistance to Algeria totaled US$5.9 billion, encompassing 72 projects. Currently, the World Bank is pursuing seven projects, specifically budget modernization, mortgage finance, natural disaster recovery, energy and mining, rural employment, telecommunications, and transportation. In 2005 economic assistance to Algeria from the United States amounted to US$4.4 million, most of which was attributable to the Middle East Partnership Initiative (MEPI) and the remainder to International Military Education and Training (IMET). MEPI encourages economic, political, and educational reform in the Middle East. In 2006 IMET, which provides U.S. military training to foreign troops, had a budget of US$823 million. In 2005 the European Union contributed US$58 million to Algeria's economic development under the Euro-Mediterranean Partnership.[33]

• Energy in Algeria
• List of companies of Algeria
• Poverty in Algeria
• Taxation in Algeria
• United Nations Economic Commission for Africa

• Economy of Algeria at Curlie
• Tariffs applied by Algeria as provided by ITC's Market Access Map, an online database of customs tariffs and market requirements