Despite diversification efforts, Algeria’s economy remains dependent on the oil and gas sector, which accounted for 14 percent of GDP, 83 percent of exports, and 47 percent of budget revenues between 2019 and 2023. Algeria’s public sector has been at the core of its development model, supporting significant improvements in living standards, education, and health prior to the pandemic.

Productivity growth and diversification have been limited, prompting the introduction of reforms to boost investment and private sector development. The 2022 Investment Law, the 2023 Banking and Monetary Law, the 2023 Economic Land Law, and efforts to dynamize the stock exchange evidence the government’s commitment to a diversified, private-sector-led model of growth and job creation while maintaining the social role of the state.

Growth has been robust since the pandemic, despite moderating hydrocarbon production, driven by dynamic investment and household consumption, and growing public spending on wages and transfers. Inflation surged between 2021 and 2023 but moderated by late 2024. Falling hydrocarbon prices and a series of OPEC quota cuts, coupled with expanding investment-driven imports and public spending growth, have put the fiscal and external balances under pressure.

Algeria’s successful economic transformation will hinge on its ability to foster rapid, private-sector-led growth and job creation to ensure sustainable and inclusive development. Diversification away from carbon-intensive growth, exports, and fiscal revenues, together with a gradual fiscal rebalancing, will be crucial.