Economy
From The Report: Algeria 2018
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As Africa’s most important gas exporter, Algeria remains highly dependent on the hydrocarbons sector for the majority of government revenues and almost the entirety of its exports. Despite reforms to encourage private sector development, promote diversification and attract foreign direct investment in recent years, the state plays a preponderant role, meaning that expenditure and investments continue to have a significant impact on overall economic performance. The drop in global oil prices since 2014 is at the root of Algeria’s most recent economic challenges, giving rise to large twin deficits in the fiscal and current accounts. The strategy embarked by the authorities in late 2017 has brought some relief to Algeria, though the sustainability of this approach rests on the adoption of necessary corrective measures from 2019 onwards. This chapter contains interviews with Abderrahmane Raouya, Minister of Finance; Richard Lesser, CEO, Boston Consulting Group; and Ali Haddad, President, Algerian Business Leaders’ Forum.

Articles from this Chapter

Overview

Changing track: New strategy seeks to increase public spending and improve the investment climate
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Recovering international oil prices and a loosening of the government’s purse strings have afforded Algeria some breathing room after a number of challenging years for the economy. As Africa’s most important gas exporter, Algeria remains highly dependent on the hydrocarbons sector for the majority of its government’s revenues and almost the entirety of its exports. Despite reforms to encourage private sector development, promote diversification and attract foreign direct investment (FDI) in…

Analysis

Organic changes: Legislative reform expected to enhance budget planning
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One of the most important budgetary reforms to be introduced in Algeria in recent years was the promulgation of the Organic Finance Law on Finance Laws in August 2018. Annual finance laws from 2021 will be prepared under procedures and parameters set out in the new Organic Law. Requiring several years before it is fully implemented, the legislation represents the first such fundamental change to the budgetary process since the 1985 Organic Law was implemented. While this is essentially an exercise…

Overview

Business Barometer: Algeria CEO Survey:
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While the 2014-17 period saw the effectiveness of the import ban called into question and was marked by a significant drop in oil receipts, recovering commodity prices in 2018 appear to be bolstering both local business sentiment and economic growth prospects. The results of the second OBG Business Barometer: Algeria CEO Survey, gathered through face-to-face interviews with 90 of the country’s top executives, show that the general outlook is optimistic, with 73% expressing positive or very positive expectations of local business conditions in the coming 12 months, up from 61% in the November 2017 edition of the survey. For more information on…

Overview

How well founded is the positive outlook of CEOs?
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With the import ban launched in 2016 having coincided with a drop in energy prices, in early 2018 Algeria started to rethink, with a view at improving the country’s finances and easing a challenging tax situation. In June 2018 Parliament duly approved a measure replacing the ban on certain products with Customs duties. The 2014-17 period saw the effectiveness of the import ban being called into question: while it was intended to boost local industries and promote competitiveness internally, results have yet to be seen. The period was also marked by a significant drop in oil prices, highlighting the need to promptly implement economic diversification…

Interview

Economic equality: Abderrahmane Raouya, Minister of Finance, on subsidy reforms, entrepreneurship and public spending
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Interview :Abderrahmane Raouya How will the new Organic Law relative to Finance Laws improve public budgetary management? ABDERRAHMANE RAOUYA: The Organic Law No. 18-15 put in place in September 2018 defines the general framework by which financial laws are formulated, adopted and executed. This law is part of wider budgetary reforms that will ensure a better management of public funds, and improve the efficiency and transparency of public spending. This can be achieved through a more results-oriented…

Analysis

Quantitative easing: A closer look at the new macroeconomic strategy and its impacts
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Faced with slowing economic growth and an increasingly constrained banking sector, Algeria decided to change its macroeconomic strategy in October 2017. As part of the new plan, monetary and fiscal policies would be eased simultaneously, an approach which has come to be known in Algeria as “quantitative easing”. Instead of continuing to narrow the budget deficit every year until coming to balance by 2020, the target for a balanced budget was pushed back to 2022, with the budget for 2018 to be…

Analysis

Protective measures: Import restrictions and structural reforms target increased domestic production and long-term economic sustainability
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The fall in oil prices from mid-2014 onwards not only heralded an economic slowdown and a sharp rise in Algeria’s twin deficits, it also called into question the longer-term sustainability of the country’s hydrocarbons-dependent development model. In July 2016 the authorities unveiled their new growth plan, a strategic vision to transform the economy by 2030. The overarching objective is to promote economic diversification through accelerated growth in the non-hydrocarbons economy, particularly…

Overview

Tax liabilities: Impacts of the trend towards lower corporate tax rates on developed and developing economies – Algeria
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Recent decades have seen a downward trend in corporate taxation, with headline corporate tax rates falling by 20 percentage points since the early 1980s. The average for advanced economies dipped to 22% in 2015, and investment incentives have further reduced effective rates for transnational corporations. After the 2007-08 global financial crisis, many countries had to slash spending and raise revenue to rein in deficits, but lower corporate taxes persisted. In the face of post-crisis austerity, however, public tolerance of corporate tax avoidance has dissipated, thus increasing political momentum to improve transparency and limit loopholes. The…

Interview

Unlocking potential: Richard Lesser, CEO, Boston Consulting Group, on boosting the economy through diversification and international partnerships
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Interview : Richard Lesser What are Algeria’s main competitive advantages, and how can its potential be unlocked? RICHARD LESSER: Algeria has many assets that it can use to become and remain a strong economic power in Africa. It is the largest territory on the continent and has abundant natural resources, a young and educated workforce and a growing internal market. The country can benefit from its favourable position at the heart of the Maghreb region, with access to fast-growing markets. In…

Overview

Global village: Medium-term prospects suggest globalisation is set to continue for the foreseeable future – Algeria
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Decades of growth in trade and foreign investment have seen global economies become more interconnected than ever before. This trend has been reinforced by the steady liberalisation of international trade and investment, at the bilateral, plurilateral and multilateral levels. National economic specialisations, and regional economic and political integration, have broadly proceeded in a single direction since the 1980s. On aggregate, emerging markets have become the main drivers of growth around the world. Limitations Despite the apparent progress of trade and investment liberalisation, multilateral negotiations aiming for further openness have…