Algeria is classified as an upper middle income country by the World Bank. Algeria’s currency is the dinar (DZD). The economy remains dominated by the state, a legacy of the country’s socialist post-independence development model. In recent years, the Algerian government has halted the privatization of state-owned industries and imposed restrictions on imports and foreign involvement in its economy.
Algeria has struggled to develop industries outside hydrocarbons in part because of high costs and an inert state bureaucracy. The government’s efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector have done little to reduce high youth unemployment rates or to address housing shortages. The country is facing a number of short-term and medium-term problems, including the need to diversify the economy, strengthen political, economic and financial reforms, improve the business climate and reduce inequalities amongst regions.
A wave of economic protests in February and March 2011 prompted the Algerian government to offer more than $23 billion in public grants and retroactive salary and benefit increases. Public spending has increased by 27% annually during the past 5 years. The 2010–14 public-investment programme will cost US$286 billion, 40% of which will go to human development.
The Algerian economy grew by 2.6% in 2011, driven by public spending, in particular in the construction and public-works sector, and by growing internal demand. If hydrocarbons are excluded, growth has been estimated at 4.8%. Growth of 3% is expected in 2012, rising to 4.2% in 2013. The rate of inflation was 4% and the budget deficit 3% of GDP. The current-account surplus is estimated at 9.3% of GDP and at the end of December 2011, official reserves were put at US$182 billion. Inflation, the lowest in the region, has remained stable at 4% on average between 2003 and 2007.
In 2011 Algeria announced a budgetary surplus of $26.9 billion, 62% increase in comparison to 2010 surplus. In general, the country exported $73 billion worth of commodities while it imported $46 billion.
Thanks to strong hydrocarbon revenues, Algeria has a cushion of $173 billion in foreign currency reserves and a large hydrocarbon stabilization fund. In addition, Algeria’s external debt is extremely low at about 2% of GDP. The economy remains very dependent on hydrocarbon wealth, and, despite high foreign exchange reserves (US$178 billion, equivalent to three years of imports), current expenditure growth makes Algeria’s budget more vulnerable to the risk of prolonged lower hydrocarbon revenues.
In 2011, the agricultural sector and services recorded growth of 10% and 5.3%, respectively. About 14% of the labor force are employed in the agricultural sector. Fiscal policy in 2011 remained expansionist and made it possible to maintain the pace of public investment and to contain the strong demand for jobs and housing.
Algeria has not joined the WTO, despite several years of negotiations.
In March 2006, Russia agreed to erase $4.74 billion of Algeria’s Soviet-era debt during a visit by Russian President Vladimir Putin to the country, the first by a Russian leader in half a century. In return, Algerian President Abdelaziz Bouteflika agreed to buy $7.5 billion worth of combat planes, air-defence systems and other arms from Russia, according to the head of Russia’s state arms exporter Rosoboronexport.
Dubai-based conglomerate Emarat Dzayer Group said it had signed a joint venture agreement to develop a $1.6 billion steel factory in Algeria.