Algeria

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Area: 2,381,741 sq. km

Population: 40,290,000 (2014, est.)

Capital: Algiers

GDP: USD 213.5bn (2014 est.)

Exports: USD 61.1bn (2014, est.)

Imports: USD 55.36bn (2014, est.)

Currency: Algerian Dinar (DZD)

Exchange rate: 1 USD = 107.23 DZD (01/2016)

 

Economic Development and Reform Policy:

The export or hydrocarbon energy remains the flagship of the Algerian industry and contributes about 98% of its foreign currency assets; especially since oil prices have been very high in recent years. According to German Trade and Industry (GTAI) estimates, Algeria’s GDP rose by 3.3% in 2012 and by 3.1% in 2013. In 2014, an estimated growth of 3.7% was anticipated. Macroeconomics data also hints at positive developments: the unemployment figure, for example, stood at approximately 10% in both 2012 and 2013 and was expected to fall to 9.8% that year. The inflation rate also should have decreased to a moderate 4.5% in 2014, with the high inflation rate of 8.9% in 2012 already having had plummeted to 5% by 2013. Algeria has high foreign exchange reserves at its disposal, which will amount at an estimated USD 197.1bn in 2014. For 2014, the external debt has been valued at USD 5.1bn.

In 2013, revenues from the export of petroleum and gas sank in part due to an increased domestic consumption and falling prices. The import volume – above all from consumer goods such as foodstuffs and refined oil products – grew steadily. In 2013, approximately USD 55.02bn of goods was imported. The current account balance decreased from 5.9% of the GDP in 2012 to a projected 1.8% in 2013, and was anticipated to remain at 1.2% in 2014. Due to the high significance of petroleum and gas exports to Algeria, continued infrastructure investments as well as the exploitation of new reserves are indispensable in order to maintain the present levels of output. Nevertheless, Algerian oil deposits are assumed to be severely limited. In contrast, natural gas deposits are expected to last considerably longer, particularly when shale gas is taken into account.

The International Monetary Fund (IMF) recorded a verdict of generally satisfactory economic development for Algeria in 2013, supported by strong private sector demand and state investment, and characterized by a responsible monetary policy and on going fiscal consolidation. Challenges include shortcomings in competitiveness and productivity, bureaucratic obstacles, youth unemployment, as well as the danger of inflationary tendencies following the jump on bank lending and public sector salary increases. Furthermore, dependence on oil and gas exports exposes Algeria to the twin risks of an international financial crisis and the possibility of falling prices. These developments could waken Algeria’s strong external position in the medium and long term and have demonstrated the need for the diversification of the Algerian economy.

Partnerships with foreign companies continue to be subject to complex regulations. Still in effect is the provision created in 2009 stipulating that foreign investors may own a maximum 49% minority stake while Algerian partners must always retain the controlling interest. In the course of the meeting held several times a year between government, employer and employees’ associates (tripartite conversations), Prime Minister Sellal appealed for the liberalization of the Algerian economy and the promotion of both competition and private initiatives.

Progress in the talks, which are being held in working groups, is expected in the course of spring. The 2014 finance law, which recently came into effect, already contains a few reforms in this field. Under certain conditions, companies can claim tax concessions, for example through investment-related knowledge transfer to local partners, and can be dependent on the location and size of the enterprise in question. The tax breaks nevertheless require an authorization process with the responsible Algerian authorities. In foreign trade, ‘Remdoc’ (export collection) is now an approved payment method alongside ‘Crédoc’ (export letter of credit).

An expenditure of USD 286bn was approved as part of the 2010-2014 public development plan, of which USD 130bn was designated for the continuation of existing projects and USD 156bn for new projects. The focuses of this investment plan were both infrastructure projects, such as the upgrading of the road and rail network and the power and water supply, as well as residential construction. In 2014, the focus shifted to the expansion of regional and long-distance rail transit. In the medical technology sector, GTAI is expecting a high growth potential with double-digit import volume growth rates. At present, nine new hospitals have reached the construction phase. A promising growth potential is also anticipated in the construction sector and the field of machine manufacturing.

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