Economic Overview

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

The Algerian economy is mainly driven by hydrocarbons and public investment, with the former accounting for 40% of GDP, 94% of exports and one-third of fiscal revenues. In 2022, the country benefited from high energy prices and the increased demand from Europe that followed the EU sanctions against Russia: overall, the IMF estimated growth at 4.7%. In the same year, non-hydrocarbon GDP growth was projected to accelerate to 3.2%, from 2.1% one year earlier (IMF), despite the erosion of household purchasing power caused by food price-driven inflation. For 2023, GDP growth is forecast at 2.6% amid lower investment (especially in the private sector), with a further deceleration for 2024 (2% according to the IMF).

In recent years, continued large fiscal and external current account deficits have reduced policy space as public debt increased significantly and international reserves declined (IMF). The situation improved only partially in 2022, as higher hydrocarbon revenues contributed offsetting the government's operational and capital expenditure and the large share of social transfers (estimated to account for around 9.5% of GDP according to Coface). Nevertheless, such a strong dependence on oil prices underlines the need for economic diversification, especially toward petrochemicals, gas and agricultural products that have high export potential. After soaring following the COVID-19 crisis, the public debt-to-GDP ratio decreased to 62.7% in 2022, but it is expected to follow an upward trend over the forecast horizon, at 70.3% this year and 75.6% in 2024 (IMF). Overall, Algeria’s external debt level is very low (less than 3% of GDP) but could increase in the event of adverse shocks or if fiscal deficits widen. Foreign exchange reserves have been falling since 2013, decreasing from USD 195 billion to USD 53.5 billion in September 2022. Inflationary pressures have intensified due to higher international food prices and an episode of drought: the annual average inflation rate reached 9.7% in 2022, a level not seen in 25 years. The central bank has taken actions to control price pressures, but monetary policy remained accommodative, and the IMF expects inflation to remain high in 2023 (8.7%) and 2024 (9.3%). The new Government Action Plan comprises a wide range of reforms to support the transition towards a more diversified and sustainable economy and bolster governance and social cohesion, for example focusing on the mining sector (iron, phosphate), in accordance with the 2021-2023 national mining programme. Moreover, the country is looking for ways to reduce its dependence on gas for power generation by investing in solar energy.

According to IMF estimates, unemployment hit 13.7% of the population in 2022. As per the World Bank, unemployment is highest among youth, women and graduates due to skills mismatch in the labour market. With a youth unemployment rate above 30%, in 2022 Algerian President Abdelmadjid Tebboune announced a new unemployment benefit for first-time jobseekers aged 19 to 40. There are also big differences between living conditions in cities and rural areas, and instability caused by radical groups on Algeria's borders remains a risk factor.

Foreign Trade

Algeria has an open economy in which foreign trade represents 53% of GDP (World Bank). Natural gas and petroleum products account for nearly all exports: in 2021, hydrocarbons represented 91% of the total volume of exports (39% natural gas, 37% crude oil and 17% motor fuels). Three groups of goods accounted for almost three-quarters of the total: industrial capital goods (26.7%); foodstuffs (23.5% - mainly cereal and dairy products); and semi-finished goods (23.2% - mainly steel products – Data French Ministry of the Economy). According to the National Centre of the Trade Register (CNRC), in 2022 the number of exporters registered in the Trade Register rose to 5,498 operators against 4,749 at the end of 2021.

The latest data from Comtrade shows that Italy is the top destination for Algerian exports (16%), followed by France, Spain, the United States and Brazil. China is by far the main supplier of goods in Algeria (18.1% of all imports), followed by France, Italy, Germany and Spain. Algeria is the EU's 28th biggest trade partner, representing 0.7% of the EU’s total trade in goods in 2020; whereas the EU is Algeria's biggest trade partner and accounts for the majority of Algeria’s international trade (46.7% - Eurostat, latest data available). Algeria ratified the Agreement on the African Continental Free Trade Area (AfCFTA) in 2019 in Accra, Ghana. The agreement allows interested states to benefit from the progressive elimination of tariff barriers for a period of five years from its entry into force in July 2020. The agreement aims to free African states from dependence on the extraction of raw materials and promote inter-African trade.

While the trade balance was historically positive, the surplus has vanished completely since late 2012 and the country has had a trade deficit since 2015. This reduction was due to a sharp fall in hydrocarbon exports, which represent nearly all exports. Incomes have also decreased drastically with the fall of oil prices. Nevertheless, such a trend reversed in 2021 thanks to the uptick in energy prices and it improved further in 2022 as Algeria benefited from the consequences of the EU sanctions towards Russia, which led to an increase in European hydrocarbon imports from Algeria. Data from the World Bank shows that the country’s trade balance was positive by an estimated 0.2% of GDP in 2021. In the same year, exports of goods increased by almost 70% year-on-year, reaching USD 36.7 billion; whereas imports grew at a much slower pace (+2.5%, at USD 36 billion). In terms of services, the country exported the equivalent of USD 3 billion and imported USD 6.6 billion (data WTO).

COVID-19 Country Response

Travel restrictions

Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.

Import & export restrictions

A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.

Economic recovery plan

ent, consult the dedicated page on the KPMG website.
For updates on the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) undertaken by the Algerian government, please consult the country's dedicated section in the IMF’s Policy Tracker platform.

Support plan for businesses

For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.