Algerian Economy: Positive Outlook as World Bank Foresees Growth

BY: Hana Saada

ALGIERS- In its latest report on Algeria’s economic situation, the World Bank is forecasting a positive outlook for the country over the next two years. The report highlights that a surge in investments, particularly in large industrial projects, has bolstered economic activity in Algeria in the first quarter of 2023, and this momentum is expected to continue, supporting growth from 2023 to 2025.

Kamel Braham, the World Bank’s resident representative in Algeria, emphasized that “Algeria has the potential to diversify its economy, reduce its dependence on imports, increase non-hydrocarbon exports, and create sustainable jobs in the private sector.”

Stronger GDP Growth in 2024 and 2025

Cyril Desponts, a senior economist at the World Bank focusing on Algeria, stated that “the strong performance of the hydrocarbon sector and the positive investment dynamics are set to persist.” He further pointed out that “Algeria has implemented short-term macroeconomic buffers through the accumulation of foreign exchange reserves and budgetary savings.”

The World Bank’s report also notes that Algeria’s economy “recovered its pre-pandemic level in 2022, with continued growth in the first half of 2023. Algeria’s growth is expected to return to its pre-COVID trajectory by 2024, driven notably by the hydrocarbon and agriculture sectors.”

Sustained Robust Investment Growth

The World Bank anticipates that the Gross Domestic Product (GDP) growth will be even stronger in 2024 and 2025, propelled by the recovery in agricultural production and crude oil output following the adjustment of OPEC quotas.

According to the World Bank, investment is expected to remain “robust” and continue supporting industrial activity, particularly in the private sector.

Declining Inflation

The World Bank’s projections also indicate a gradual decline in inflation over the next two years. “Inflation is expected to gradually recede in 2024 and 2025,” thanks to prudent monetary and fiscal policies, as mentioned in the report.

Expectations for Strong Agricultural Output

The World Bank foresees “robust agricultural production” as long as precipitation patterns improve. The balance of trade is expected to remain positive throughout 2023, 2024, and 2025, and the accumulation of foreign exchange reserves is set to continue during this period.

The report further states, “The authorities have built up additional foreign exchange reserves and oil savings, enhancing the medium-term resilience of the Algerian economy, while the rise in gas prices and oil prices in the second quarter of 2023 may extend the windfall from hydrocarbons.”

Algeria appears to be on a path of economic resurgence, with diversified growth drivers and favorable economic policies contributing to its positive outlook for the years ahead.