publication October 3, 2018

Algeria's Economic Outlook - October 2018

Following a strong slowdown in growth in the first half of 2017, the government eased its fiscal consolidation program during the last quarter of 2017 and in the first half of 2018.  This fiscal relaxation coincides with a sharp increase in the international price of oil.  This price effect more than offset the decline in production (-1.3 percent expected for 2018). As a result, real GDP is expected to grow by 2.5 percent, up from 1.6 percent in 2017, driven by the demand side. However, in the first quarter of 2018, real GDP grew by just 1.3 percent (compared to 3.4 percent for the same period in 2017), due to supply side constraints, such a significant decline in hydrocarbon production (-2.0 percent). 

In 2019 and 2020, a slight increase in hydrocarbon production will be offset by a slowdown in non-hydrocarbon sector which most likely would bear the brunt of the programmed fiscal consolidation. This policy effort could recommence as early as in mid-2019, although the timing will depend on the availability of fiscal space and pressure on reserves over the next year.