2024-09-05 22:15:22
Growth, inflation, increased public spending: there are many economic challenges in Algeria before the election this Saturday, September 7. While oil revenues are doing well, other strategic sectors are struggling to take off again, such as industry, which is now a tiny part of the country’s economy.
Oil and gas as the main drivers of growth. This is the ancestral recipe that gives wings to the outgoing president Abdelmadjid Tebboune. Its objective: to double the gross domestic product within three years. President candidate even got a little too carried away during a campaign meeting, declaring: ” From the bottom of the ranking, the Algerian economy has today become the third largest economy in the world. »
Curse of hydrocarbons
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The Algerian economy is actually the third largest on the African continent according to the International Monetary Fund, thanks in particular to an oil revenue that has grown in line with international upheavals and price increases. But the thesis of Mohamed Loucif, a professor of economics and public finance, is that Algeria is experiencing a « curse » hydrocarbons : too much dependence would destroy any attempt to diversify the economy.
« We observe the prevalence of the oil and gas sector in the economy, the predominance of a logic of consumption compared to a logic of production with a dependence, in particular on raw materials – cereal imports exceed 60% for example – and a lack of diversification of the economy which results in a declining industrial sector. And that is a bit of the Algerian paradox. What could be considered a comparative advantage is counter-intuitively something that can obstruct the development of an economy ” he explains.
On the business side, businessman Slim Othmani describes a private sector in mixed tones, despite the advent of a start-up ecosystem. Foreign direct investment has been in sharp decline for several years. In terms of investments, there is an interest in Algeria as a destination. Interests are increasingly expressed, assure Slim Othmani. However, I think that international investors expect more stability from the legal framework which nevertheless continues to be a little fluctuating. In summary : trust is earned, not decreed. »
A crucial election for the economy
To strengthen this confidence, Algeria comes to join the BRICS development bank, which will make it possible to mobilize more resources for investment projects. The presidential election comes at a crucial time for the country’s economy.continues Mohamed Loucif. There was still the end of a cycle in 2020, a cycle that lasted almost 20 years. Now, there is a new lease of life. So there is a real window of opportunity to initiate this shift in time, and to ensure that economic development can truly take off in this country for the benefit of businesses, the population, and even the African continent.. »
Youth unemployment rates, inflation, lack of infrastructure and a growing public deficit… These are all major issues that await and will take up space on the roadmap of the next Algerian president.
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Algeria’s Economic Challenges: A Crucial Election Ahead
As Algeria prepares for its presidential election on September 7, the country faces numerous economic challenges that threaten its growth and stability. Despite oil revenues doing well, other strategic sectors such as industry are struggling to take off again, representing a tiny part of the country’s economy [[3]]. Meanwhile, the Algerian economy is experiencing a ”curse of hydrocarbons,” where too much dependence on oil and gas is hindering efforts to diversify the economy [[2]].
Oil and Gas: The Main Drivers of Growth
Outgoing President Abdelmadjid Tebboune has made it his objective to double the gross domestic product within three years, relying heavily on oil and gas revenues. However, this over-reliance on hydrocarbons has led to concerns about the economy’s ability to diversify and reduce its dependence on raw materials. Oil revenue has grown in line with international upheavals and price increases, making Algeria the third-largest economy on the African continent, according to the International Monetary Fund [[1]].
The Curse of Hydrocarbons
Professor of economics and public finance, Mohamed Loucif, argues that Algeria is experiencing a “curse” of hydrocarbons, where too much dependence on oil and gas is destroying any attempt to diversify the economy. He explains that the prevalence of the oil and gas sector in the economy has led to a logic of consumption rather than production, resulting in a declining industrial sector. This, he believes, is the Algerian paradox, where what could be considered a comparative advantage is, in fact, obstructing the development of the economy [[2]].
Business and Foreign Investment
On the business side, businessman Slim Othmani describes a private sector in mixed tones, despite the advent of a start-up ecosystem. Foreign direct investment has been in sharp decline for several years, with investors expecting more stability from the legal framework. Othmani believes that trust is earned, not decreed, and that international investors expect more stability before investing in Algeria [[3]].
A Crucial Election for the Economy
The upcoming presidential election comes at a crucial time for Algeria’s economy. Mohamed Loucif believes that the election marks a new lease of life for the country, providing a window of opportunity to initiate a shift in time and ensure that economic development can truly take off. Algeria’s decision to join the BRICS development bank is seen as a positive step in mobilizing more resources for investment projects and strengthening confidence in the country’s economy [[2]].
Algeria’s economic challenges are complex and multifaceted. The country’s over-reliance on oil and gas, lack of diversification, and declining industrial sector are all major concerns. However, the upcoming presidential election provides an opportunity for change and a new direction for the economy. It remains to be seen whether the next president will be able to address these challenges and set Algeria on a path towards sustainable economic growth.
References:
Algeria economy ranking
Algeria’s Economic Challenges: A Crucial Election Ahead
As Algeria prepares for its presidential election on September 7, the country’s economy faces numerous challenges. Despite oil revenues doing well, other strategic sectors such as industry are struggling to take off again, making up only a tiny part of the country’s economy. In this article, we will explore the economic challenges facing Algeria and the implications of the upcoming election on the country’s economy.
Curse of Hydrocarbons
Algeria’s economy is heavily reliant on hydrocarbons, making it vulnerable to global oil and gas price fluctuations [[2]]. This overdependence on hydrocarbons has been referred to as the “curse of hydrocarbons” by Professor Mohamed Loucif, a professor of economics and public finance [[1]]. The thesis is that Algeria’s economy is experiencing a curse of hydrocarbons, where too much dependence on hydrocarbons would destroy any attempt to diversify the economy.
The prevalence of the oil and gas sector in the economy has led to a logic of consumption rather than production, with a dependence on raw materials, such as cereal imports exceeding 60% [[1]]. This lack of diversification has resulted in a declining industrial sector, making it a significant challenge for the country’s economy.
A Crucial Election for the Economy
The presidential election comes at a crucial time for Algeria’s economy. The country’s economy needs to diversify and reduce its dependence on hydrocarbons to ensure sustainable growth. The election presents an opportunity for the new leadership to address these challenges and implement reforms to promote diversification and economic growth.
Algeria’s decision to join the BRICS development bank is a step in the right direction, as it will enable the country to mobilize more resources for investment projects [[3]]. However, the country still needs to address the lack of trust among international investors, which is essential for attracting foreign direct investment.
Challenges Ahead
In addition to the overdependence on hydrocarbons, Algeria’s economy faces other challenges, including high inflation, increased public spending, and a lack of diversification. The country’s economic outlook is uncertain, and the new leadership will need to address these challenges to ensure sustainable economic growth.
According to the African Development Bank, the main development challenge facing Algeria is the need to diversify its economy [[1]]. Reforming the mechanisms of the global financial architecture would be in line with Algeria’s development objectives.
Conclusion
Algeria’s economy faces significant challenges, including the curse of hydrocarbons, high inflation, and increased public spending. The upcoming presidential election presents an opportunity for the new leadership to address these challenges and implement reforms to promote diversification and economic growth. The country needs to reduce its dependence on hydrocarbons and promote diversification to ensure sustainable growth.
People Also Ask (PAA) Questions
- What are the main economic challenges facing Algeria?
- How can Algeria diversify its economy and reduce its dependence on hydrocarbons?
- What is the impact of the curse of hydrocarbons on Algeria’s economy?
- How can Algeria promote foreign direct investment and attract international investors?
- What are the implications of Algeria’s decision to join the BRICS development bank on its economy?
References:
[[1]]https://www.afdb.org/en/countries-north-africa-peoples-democratic-republic-algeria/algeria-economic-outlook
[[2]]https://www.specialeurasia.com/2024/05/27/algeria-country-risk
