The economic context of Algeria

Economic Indicators

The Algerian economy is mainly driven by hydrocarbons and public investment, with the former accounting for roughly 40% of GDP, 90% of exports and one-third of fiscal revenues. After accelerating to 4.1% in 2023, Algeria’s economic growth remained strong in 2024 (+3.8%), driven by non-extractive sectors and dynamic investment. Non-extractive GDP growth was broad-based, supported by resilient agricultural output. However, extractive GDP remained flat due to a reduced crude oil production quota in January and weaker European gas demand. For 2025 and 2026, GDP growth is forecasted to decelerate marginally to 3% and 2.5%, respectively. As hydrocarbon production slows, financing constraints limit budget spending, while structural bottlenecks hinder private sector growth (IMF).

In recent years, continued large fiscal and external current account deficits have reduced policy space as public debt increased significantly and international reserves declined. After narrowing to 2.3% of GDP in 2023, Algeria’s current account reached balance in H1-2024 due to declining export prices and volumes, while imports remained high, driven by investment. Foreign exchange reserves rose slightly, covering about 16.2 months of imports by the end of September 2024. The fiscal deficit, which stood at 5.2% of GDP in 2023, widened further, driven by lower hydrocarbon revenues and rising expenditures, including the final phase of public sector wage increases. The deficit was mainly financed through oil savings (EU Commission). Meanwhile, the debt-to-GDP ratio decreased to an estimated 45.7% last year (from 48.6% in 2023) but is expected to follow an upward trend over the forecast horizon, reaching 53.9% by 2026 IMF). Inflation slowed to 4.3% year-on-year in the first nine months of 2024, driven by stabilizing fresh food prices. Inflation had been rising since 2021, peaking at 9.3% in 2022 and stabilizing in 2023. Food price inflation, particularly for fresh items, hit vulnerable populations hard, as food makes up over half of expenditures for the bottom 40%. However, prices for fruits, vegetables, meat, and fish began to decline in mid-2023, helped by resilient agriculture and meat imports. This, along with a stable exchange rate and moderating import prices, contributed to the overall inflation slowdown. Monetary policy remains accommodative, with accelerated growth in the money supply and increased credit to the private sector.

Unemployment rates returned to pre-pandemic levels in 2023 (latest data available). According to International Labor Organization (ILO) estimates, the overall unemployment rate dropped to 12.3% (-0.2 pp), female unemployment fell to 21.5% (-0.3 pp), and youth unemployment decreased to 31.3% (-0.7 pp). Algeria has a low GDP per capita, estimated at USD 18,343 in 2024 by the IMF (PPP). There are also big differences between living conditions in cities and rural areas, and instability caused by radical groups on Algeria's borders remains a risk factor.

Main Sectors of Industry

Agriculture accounts for 13.1% of Algeria’s GDP and employs 9% of the workforce (World Bank, latest data available). The main crops are wheat, barley, oats, citrus, wine grapes, olives, tobacco and dates. Algeria also produces a large quantity of cork and is an important livestock farmer. The country heavily depends on cereal grain imports, with soft (common, milling) wheat being the primary staple to meet consumption needs. In the 2023/24 season, cereal imports remained high due to below-average domestic production, which was impacted by dry weather conditions. In late 2023, the government introduced the “Strategic plan for the development of cereal production in Algeria 2023-2028”, aimed at developing the soft wheat, maize, sugar and oilseeds sectors to reduce the annual food import bill. National wheat production was anticipated at 3 million tonnes in the 2024/25 season, that of barley at 1 million (USDA).

The secondary sector represents 37.8% of GDP, employing 31% of the active population. The oil and gas sector accounts for most of the federal income and almost all of its export income (it represents over 90% of total exports). Algeria is among the top ten largest gas exporters in the world, it ranks 16th in oil reserves and 10th in confirmed gas reserves. The ores mined in large quantities are iron, lead, phosphate, uranium, zinc, salt and coal. The main activities of the manufacturing sector are industrial food processing, textile and chemical products, metals and construction materials. The manufacturing sector as a whole accounts for 9% of GDP (World Bank). Figures from the Ministry of Industry show that in the first three quarters of 2024, the public industrial sector recorded a growth rate of over 3.3% compared to the previous year.

The tertiary sector contributes to 45.6% of the GDP and employs 60% of the workforce. Algeria's banking sector is dominated by public banks, which suffer from high levels of non-performing loans to state-owned enterprises. Of the 20 banks operating in Algeria, six state-run banks retain the lion’s share of the market. With over 1,600 km of Mediterranean coastline, important cultural and historical sites, and the striking desert landscapes of the Sahara, Algeria has long held considerable potential for tourism. Nevertheless, the sector still accounts for a small part of GDP.

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	9.3	30.8	59.9
Value Added (in % of GDP)	13.1	37.8	45.6
Value Added (Annual % Change)	2.9	3.9	3.8

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:

49,7/100

World Rank:

162

Regional Rank:

13

 

Business environment ranking

Definition

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:

4.47/10

World Rank:

76/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Sources of General Economic Information

Ministries

Ministry of Industry and Mining
Ministry of Commerce

Statistical Office

The National Office of Statistics

Central Bank

The Bank of Algeria

Stock Exchange

SGBV Algiers Stock Exchange

Economic Portals

Algerian portal for political, economic, IT, sports and cultural news in Algeria and worldwide.