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publication December 22, 2021

Algeria's Economic Update — Fall 2021


Download Executive Summary: English

Restoring the Algerian Economy after the Pandemic

Algeria is enjoying temporarily breathing space, as hydrocarbon prices reach new highs and the COVID-19 pandemic eases. Surging hydrocarbon exports revenues are contributing to a marked decline in external financing needs and to the short-term stabilization in growing domestic financing needs.

Meanwhile, the economic recovery in nonhydrocarbon sectors lost steam, remaining largely incomplete, while inflationary risks are materializing. After a strong recovery during the second half of 2020, led by a rebound in investment and in construction activity, GDP contracted during the first and the second quarters of 2021, tracking the weakening in construction and services activity. Therefore, during the first half of 2021, GDP and nonhydrocarbon GDP remained 3.1% and 3.9% below their pre-pandemic level, respectively.

Absent decisive implementation of the reform agenda, the economic outlook points to a fragile recovery, and to deteriorating fiscal and external balances in the medium-term. We expect real GDP growth to reach 4.1% in 2021, and to decline gradually in the medium-term, amid progressive implementation of the announced structural reform agenda to kickstart investment and growth in the nonhydrocarbon segment of the economy. Meanwhile, health and education have become increasingly important dimensions of deprivation, pointing to policy priorities for further Algerian human development.

The report is divided into four chapters. Chapter 1 presents macroeconomic developments in Algeria in 2021. Chapter 2 describes the short and medium term prospects of the Algerian economy. Chapter 3 presents the evolution of non-monetary poverty in Algeria between 2013 and 2019. Finally, Chapter 4 provides an overview of the issues related to natural disaster risk management in Algeria.