Magazine

Read the latest edition of AIR and MEIR as an Interactive e-book

Mar 2024

Algeria: Economy expected to grow 1.5% this year, down from 2.2%

Source: Middle East Insurance Review | Mar 2018

The Algerian economy will grow at 1.5% this year, slower than the 2.2% growth rate estimated for 2017, said international credit insurer Coface. The country’s inflation rate, which stood at 5.5% last year, will increase to 6% in 2018.
 
   Since 2014, public-sector expenditure made it possible to limit the impact of the fall of the oil price on the Algerian economy, Coface said in its latest report. 
 
   However, in the face of the exhaustion of the state’s financial resources and a fall in public spending, economic growth in Algeria slowed in 2017. Although the oil sector recorded strong growth during the year, this growth did not fully offset the slowdown in non-oil activity, reported The North Africa Post.
 
   In 2018, the effects of the government’s efforts to support consumption will be limited, with a parallel rise in inflation, said Coface. 
 
   The year will also continue to see large public deficits, high unemployment among young people and increased risks of tension and social protest.
 
   In addition, to finance the fiscal deficit, the Algerian government passed a new framework law in September 2017 allowing the state to borrow directly from the Bank of Algeria for five years. This financing method will lead to greater domestic inflationary pressures, while import barriers will tend to increase prices for foreign products, said Coface. Algeria’s public deficit is expected to remain significant in 2018.
 
   Some weak points of the Algerian economy are its heavy dependence on hydrocarbons, the high rate of youth unemployment, bureaucratic burdens and the existence of “lines of division between power and the population”, said Coface. 
 
   For strengths, Algeria has significant oil-and-gas reserves, including shale gas. However, the reintroduction of quotas in line with the OPEC agreement is expected to limit the growth of the oil sector, already adversely affected by a lack of investment and the maturity of some oil fields.
 
   Algeria’s external accounts have continued to run a large deficit since 2015. The gap between exports and the country’s imports remains. Foreign-exchange reserves continue to decline and are expected to fall below US$100 billion in 2018.
 
   Coface has also downgraded Algeria’s rating to C over serious concerns of social frustrations in the country where high risks of social turmoil are exacerbated by the volatility of oil prices. 
 
   Algeria’s economic downturn is also starting to have an impact socially, which will prompt the government to continue its generous policy of social transfers to the detriment of fiscal consolidation, said the trade credit insurer. 
 
   The Coface country assessments are on a scale of 8 levels in the ascending order of risk: A1 (very low risk), A2 (low risk), A3 (satisfactory risk), A4 (suitable risk), B (high risk), C (high risk), D (very high risk) and E (extreme risk). M 
 
| Print
CAPTCHA image
Enter the code shown above in the box below.

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.

 

Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.