Algeria: Hydrocarbon, a blessing or a curse ?

Country Report

General overview

Hydrocarbons (oil but particularly gas) remain pivotal for economic development as the sector accounts for around 40% of GDP and 99% of exports. Accordingly, current low oil prices curb GDP growth to lower levels than in the past. This assertion holds despite the recent humble recovery. 

EH expects GDP will expand by +3% in 2017 and +2.5% in 2018, only one point below the average ten-year growth rate (2006-15). This suggests that other factors have been limiting economic development.

The Algerian economic model, which relies heavily on state-run enterprises is not efficient. Even programs to boost public spending (including increased subsidies and investment in infrastructure), reflected to some extent an initial official response to prevent contagion from the Arab Spring and did not raise growth rates markedly above annual population expansion.

Until a leadership succession process is clarified significant uncertainties will weigh on investment and consumption decisions, with negative effects for trade.