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publication October 7, 2021

Algeria's Economic Update — October 2021


Download Algeria report: English

The Algerian economy is undergoing a fragile recovery, supported by a rebound in hydrocarbon output, exports and prices. Together with high oil prices, continued exchange rate depreciation and import compression policies have eased fiscal and external financing requirements, however contributing to a significant uptick in inflation. Amid protracted economic uncertainty, accelerating the implementation of the Government Action Plan will be essential to sustain the recovery, transition away from dependance on hydrocarbon exports and restore macroeconomic equilibria, while safeguarding social achievements.

Recent Developments

, as well as an opportunity for the new Government to engage key structural reforms. In Q1-2021, GDP staged a modest recovery from a 4.9% contraction in 2020, as the surge in natural gas production added to the increase in OPEC crude oil production quotas to boost hydrocarbon production and exports. Supported by the lifting of lockdown measures, nonhydrocarbon GDP timidly reached Q1-2019 levels, with the rebound in construction and industrial activity overperforming the services sector.


A fragile recovery is expected in 2021 and 2022, amid a modest one in nonhydrocarbon sectors and a strong rebound in the hydrocarbon sector. As the latter resumes its structural decline, GDP growth is expected to slow down. Despite the acceleration of the COVID-19 vaccination, deteriorated employment and firm revenues will constrain private consumption and investment, while limited fiscal space will constrain the recovery in public investment. Sustained exchange rate depreciation and high hydrocarbon prices will help contain the overall budget deficit, as higher hydrocarbon revenues balance out increases in public spending and realized contingent liabilities.