Algeria is a country located in the north of Africa, it is known for its ample natural resources and advantageous location. The country’s economy plays a big part in its overall development, but it also faces a lot of adversity.
Introduction
With a population of 46,1 million as of April 2023, it’s the largest country in Africa and the tenth largest in the world. It is rich in oil(a member of OPEC since 1969), natural gas, iron ore, and other natural resources. With its large population and valuable resources, Algeria has the potential to provide a large workforce and consumer base. However, this would require appropriate planning and management to fully leverage its benefits.1
Economic Indicators
To assess the health of
Algeria’s economy we must first closely examine several key economic
indicators.
The latest available data shows that Algeria’s inflation rate is at 9.4%. Which is above the central bank’s target range of 3%. This increase in inflation is due to weak exchange rates and the global rise in food prices(13%in Algeria).2
Despite the high inflation rate, with a GDP of $163.04 billion, and an annual growth of 2.6%, indicating a steady recovery from the pandemic, thanks to the increase of oil and gas prices. For the first time in over a decade, the country is expected to have more money coming in than going out in 2023.3
However, the country's international debt as of 2021 stands at $7.8 billion, a 43% increase from 2020. On the positive side, the international reserve witnessed a significant rise from $46.7 billion in 2021 to $53.5 billion in 2022.4
The unemployment rate has slightly increased over the past few years and it's at 13%.5
https://www.nationsonline.org/oneworld/map/algeria_map.htm
Economic Challenges
Algeria faces several challenges
in its economy, including heavy reliance on exporting natural resources(over 90% of foreign currency
receipts come from oil&gas exports) which makes the economy vulnerable and
at risk of global price variations.
Algeria’s economy operates informally with a lack of regulation. Tax evasion is a widespread phenomenon.6 Additionally, to keep hard cash inside the country, Algeria banned car imports in 2016 despite not producing any, which resulted in scarcity. Tariffs on phones and even chocolates were increased up to 200%. So it's obvious that Algeria is attempting to reduce its reliance on imports by supporting local manufacturing.7
In many countries, a car is not considered an investment, as its price drastically drops after leaving the dealership. However, that’s not the case in Algeria. My cousin Hichem K. owns a 2014 Volkswagen that has not only accumulated a lot of mileage but has been involved in several accidents. In a normal economic environment, there is no way that car is worth what it was bought for. However, in Algeria, this is not the case. Moreover, car owners are even reluctant to sell their used cars for the same price they bought them for or even more in certain cases, as there is a high chance they wouldn’t be able to find a suitable car for the price they would sell their car for.
Government Response
Algeria plans to continue investing in the non-hydrocarbon(non-gas&oil) sector in 2023, as it is projected to carry on with the non-hydrocarbon GDP growth from 2021’s 2.1% and 2022's 3.2% to 3.4% in 2023.8
This is part of the country's efforts to reduce reliance on hydrocarbon exports and spend less hard cash. One way it is doing this is by investing in local manufacturing and offering incentives such as tax breaks and free land to international car manufacturers such as Renault, Hyundai, Fiat, and Kia. The ultimate goal is to eventually export those to other nations.
The government is also fighting
the tax evasion dilemma by joining the Global Forum on Transparency and
Exchange of Information for Tax Purposes back in 2021.9
Conclusion
While Algeria is looking at noteworthy growth in its economic sector, the road is still long ahead. Because far beyond technicality, it is facing political instability and corruption which impede its exponential growth and development, and sabotages its mechanism to realize its full economic potential. By addressing these particular issues Algeria could attract foreign investors and further boost its economic growth.
1 Comments
Hello Dhia and thank you for your efforts. Very engaging and straightforward style of writing, really enjoyed your work. I wish you all the best!
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