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publication July 23, 2021

Algeria Economic Monitor (Spring 2021): Accelerating Reforms to Protect the Algerian Economy

Algerian Economic Monitor Report Page Cover (Spring 2021)

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In 2020, the dual shock posed by stringent non-pharmaceutical interventions (NPIs) to contain the COVID-19 pandemic and the severe fall in hydrocarbon revenues added to Algeria’s economic woes. While the Algerian economy showed signs of recovery during the second half of 2020, firms and workers have been deeply affected by the economic recession. The temporary decline in international oil prices further deteriorated the fiscal balance, banking liquidity and the external balance, despite the depreciation of the Algerian dinar.

The economic outlook points to a fragile recovery throughout 2021, and its sustainability hinges on the acceleration of reforms to foster private sector growth and restore macroeconomic balances. While the Algerian economy is expected to benefit from the rebound in gas production in 2021, the recovery in non-hydrocarbon sectors is expected to be slow and gradual. Meanwhile, fiscal and external financing requirements will remain substantial, expected at 18% of GDP and 10% of GDP, respectively, making it necessary to return to financing through the central bank to finance the fiscal deficit and continue import compression policies, while further exchange rate depreciation is expected.

Vulnerable households will deserve particular attention during the recovery, having been disproportionally affected by the negative consequences of COVID-19. The impact of COVID-19 over the past year has also demonstrated the need for an equitable reform of the health system.