Algeria’s economy as seen by the World Bank

2022 was a good year for the Algerian economy. The war in Ukraine was almost a boon for this hydrocarbon-dependent economy. On the other hand, this war was reflected in a number of areas, especially in relation to the rising prices of food products. Inflation hits Algeria hard.

Thus, Algeria continues to score well from international financial institutions. The World Bank emphasizes in its latest report that “Algeria’s economy continued to recover in the first half of 2022 as a result of the return of oil production to pre-pandemic levels and a sustained recovery in the services sector. agricultural activity”.

The World Bank therefore predicts that “the recovery should continue until 2023, supported by non-hydrocarbon activity and increased public spending. In the baseline scenario, consumption growth should be more modest, with the public sector and the energy sector leading investment growth, amid a gradual labor market recovery and the impact of high inflation on consumers’ real incomes. is compensated by purchasing power support measures”.

The World Bank elaborates that “oil production should stabilize at pre-pandemic levels achieved in the summer of 2022” and “gas production will remain stable from 2022, increasing its good performance”. Thus, Algeria’s oil production will be 1,031 million barrels/day in 2023, and 1,022 million barrels/day in 2024. Gas production is 102.8 billion3 in 2023 and 103 bln3 In 2024.

Moreover, apart from hydrocarbons, “growth will be supported by a full recovery in the service sector and a revival in agricultural activity.” Can we read in this report that “Industry and construction sectors can nevertheless benefit from the increase in public investment”? According to the World Bank, “in 2023, real GDP will increase by 2.3% due to its non-hydrocarbon component (+3.1%) and hydrocarbons (+0.5%), and “GDP growth will reach 1.8% in 2024. it will be moderated”. Algeria’s GDP is expected to be $197.9 billion in 2023 and $193.2 billion in 2024. However, GDP per capita is expected to decline in 2023 and 2024. It is expected to decrease from 1.8% to 0.5% in 2022. In terms of value, according to World Bank forecasts, per capita GDP should be $4,270 in 2023 and $4,094 in 2024, compared to $4,427 in 2022.

Foreign exchange reserves and inflation in Algeria

A World Bank report for this year predicts that “growth in foreign exchange reserves will peak in late 2023 with 13.5 months of goods and services imports before declining in 2024.” It also predicts that “the overall budget deficit should improve in 2022 and then widen over the medium term in the context of lower hydrocarbon revenues and tight new spending.” The World Bank explains that, “Despite the strong increase in current spending and a marked recovery in public investment introduced by CFL 2022, a strong boost in hydrocarbon export revenues creates strong revenue growth in 2022. expenses will be reduced and the overall budget deficit will be moderately reduced (5.7% of GDP).

However, the international financial institution warns that “in 2023 and 2024, the decline in the value of hydrocarbon exports will reduce revenues, which will be partially offset by an increase in tax revenues” and that “expenditures and investments will increase moderately. and the deficit financed by increasing domestic public debt will grow. Thus, at the end of 2024, the public debt will be about 68% of GDP.

As for inflation in Algeria, it “will be partially absorbed, especially by the appreciation of the dinar against the euro and the dollar,” the World Bank further predicts. partly due to the relative moderation of import prices, the deferred impact of the appreciation of the dinar against the euro, and the policy of strengthening subsidy mechanisms for food products. “Given the delayed impact of liquidity in the economy and the significant increase in public spending, the strong impact of inertia” this inflation will still remain high. 7.8% in 2023 and 6.4% in 2024 versus 9.3% in 2022.

Leave a Reply

Your email address will not be published. Required fields are marked *