Algeria Growth Poses Overheating Risk – IMF


Algeria is experiencing close to a boom economy due to high energy prices as a result from the war in Ukraine but is in danger of over-heating, experts say.

Higher energy prices have “materially improved” the Algerian economy’s near-term outlook, the International Monetary Fund (IMF) said on November 21st, but warned that fiscal re-balancing is still needed to put public finances on a sound footing.

Tighter monetary policy is required to contain inflation while continued progress on structural reforms would help to diversify the economy and spur job creation, the IMF added after completing its regular Article IV talks in Algiers on the country’s economic health.

Algeria’s minister of energy and mines said on Tuesday that there are “no ongoing discussions” on a revision of the October 5 OPEC+ oil production decision.

Speculation on “improbable revisions of OPEC+ production levels” is likely to disrupt oil markets, Mohamed Arkab said in a statement. “OPEC+ decisions are taken in complete transparency at meetings,” he added.

For decades Algeria had used its high energy revenues to run a top-down economy in which private or foreign investment was difficult, large sectors were reserved for the state and entrepreneurs were stifled by bureaucracy.

But cash reserves tumbled after oil prices fell in 2014, imperilling state finances and putting pressure on social spending, adding to public anger over political stagnation that fed mass protests which rocked the state from 2019-20.

As Algeria’s foreign currency reserves fell by two-thirds in six years and the long-term risk of unrest grew, President Abdelmadjid Tebboune’s government pushed reforms to strengthen the private sector, boosting local businesses.

Perplexed by arbitrary policy changes, plagued by corruption, hampered by bureaucracy and constrained by tight rules, Algeria’s private sector has struggled to prosper for years.

A previous reform effort under the last president, Abdelaziz Bouteflika, who emerged from a 1990s civil war that killed hundreds of thousands, ended in public fury over corruption, another factor in the 2019 mass protests.

The military, the main political power in the nation of 44 million since Algeria won its independence from France in 1962, pushed Bouteflika to step down to help quell the protests.


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