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Algeria - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Algiers
Area:: 2.382 km2
Total Population:: 38.482
Annual growth rate:: 2.00%
Density:: 16.00/km2
Urban population:: 74%
Population of Algiers (3.354), Oran (772), Setif (1.500), Djelfa (1.200), Tizi Ouzou (1.100)
Official language: Since July 1998, the official language in Algeria has been Arabic.
Other languages spoken: Most Algerians speak dialectal Arabic. Although Arabic is the official language in Algeria. Tamazight was constituted as the second national language in April 2002.
French is still used by many Algerians, especially in the administration.
Business language: French and Arabic are generally the language of business, although some companies use English.
Ethnic Origins:: The Algerian population is mainly of Berber origin.
Beliefs: Sunni Muslims: 99.6%, Catholics: 0.2%, Others: 0.2%.
Telephone codes:
To make a call from: 0
To make a call to: +213
Internet suffix:: .dz
Type of State::
Republic, parliamentary democracy combined with presidential power.
Type of economy::
Lower-middle-income economy
A country that depends a lot on its petroleum and gas activity; Algeria is a major producer of cork and a major cattle producer

Economic overview

In 2013, Algeria's growth rate was 2.6%. This growth, somehow disappointing, was driven by the local demand and the increase in public investments. The growth rate, without the hydrocarbon sector would have been 5%, this higher result was due to the decrease in performance of the petro-gas sector. The growth rate could reach 3.2% in 2014. In 2013, the hydrocarbon sector underwent through a terrorist attack on the gas site of In Amenas; there were 40 dead victims and the personnel of foreign companies was evacuated. This site should restart its operations at the beginning of 2014. In October 2013, a large oil field was discovered. Lastly, the country's inflation, which had been very high in 2012, was controlled in 2013 (5%).

The impact of the Arab spring was very limited in Algeria. The five-year plan of 2010-2014, focuses on the modernization of its infrastructures and the privatization of its economy. Priority has been given to supporting investment and to promoting the national economy. The dependence of the Algerian economy on hydrocarbons is a potential barrier to the country's sustainable development. The laws on hydrocarbons have been modified in order to make this sector more attractive and to be able to exploit shale gas. In 2013, the financial situation of the country remained in a comfortable condition: USD 206 billion in foreign reserve assets and an external debt of USD 3.4 billion. Following the same trend of 2012, public expense highly increased in 2013. According to the IMF, the public subvention policies are not sustainable and they tend to be more profitable for the rich, increasing inequalities among the population. The subventions are USD 4 billion for basic foodstuffs (wheat, milk powder). The subventions for fuel are disastrous and they feed a traffic towards Tunisia and Morocco. The IMF considers that Algeria is unwillingly financing the consumption of these countries. The management control of public expenses has become an urgent objective considering the decline of hydrocarbon reserves. The IMF also has asked to establish structural reforms in order to improve productivity and the country's business climate, to diversify its exports and to reduce its domestic consumption. According to the estimations, the debt ratio could exceed 100% in 2050. In 2013, the state announced its will to decrease significantly its budgetary deficit; however in 2014, public spending will continue to increase. The budgetary deficit could reach USD 45 billion and it will be financed by funds from the oil income (the usage of these funds without transparency has been criticized). The current surplus remains positive but it should decrease due to the reduction of hydrocarbon exports and the dynamic increase of imports.

The current unemployment rate in Algeria is officially 9.7% but some claim that in reality, it is closer to 20%. It is more prominent among young people (21.5%) and women (17%). The GDP per capita was USD 4,770 in 2012. It should be noted that there is a large disparity between the urban and rural living conditions. Lastly, if the outgoing president Bouteflika runs again for the presidential elections in April 2014, the political situation in Algeria could become tense.

Main industries

Agriculture contributes to about 10% of the GDP and employs one-fifth of the active population. The main crops are wheat, barley, oats, citrus fruits, wine grapes, olives, tobacco and dates. Algeria produces a large quantity of cork and has a significant amount of livestock farming.

The industry contributes to more than 60% of the GDP and employs one-fourth of the population. The oil and gas sector accounts for the majority of its budgetary income and almost all of its exports income. Algeria is the 2nd largest gas exporter in the world. It ranks 11th for its oil reserves and 7th for its confirmed gas reserves. The ores mined in big quantities are iron, lead, phosphate, uranium, zinc, salt and coal. The main activities of the manufacturing sector are industrial food processing, textile, chemical products, metals and construction materials. Traditionally, Algeria imports pharmaceutical products for its own needs; however, during the past few years, these imports have been decreasing while the local production is highly increasing.

The tertiary sector contributes to about one-third of the GDP and employs more than one-half of the workforce.

Foreign trade overview

Algeria has an open economy, foreign trade representing almost three-fourths of the GDP.

Although, the Algerian trade balance is structurally positive, the country experienced a strong decrease of its surplus in 2013. In one year, its surplus went down from USD 21.5 billion to USD 11 billion. This was due to a sharp drop in exports and a simultaneous increase in imports. Hydrocarbon exports continue to represent almost the whole total of exports; however, in 2013, these were reduced due to a decline in reserves and an increase in domestic demand. The increase of exports was due to the higher cost of the imported products.

The main trade partners of Algeria are the European Union, the NAFTA countries (Free Trade Agreement between United States, Canada, and Mexico) and China. Algeria mainly imports equipment, food products and consumer goods; it exports almost exclusively oil, gas and their by-products.

FDI

In regards to FDI, it can clearly be noticed a sharp decline of European investments and a revival of interest from the Gulf investors. A re-orientation of FDI towards the domestic market is also noticeable through an efflorescence of developmental projects in transportation and infrastructure. Rich in natural resources and economically stable, Algeria has attracted growing levels of FDI in the recent years, even if their stock remained weak. In 2012, the FDI stock dropped, according to some, it was the result of the introduction of a 49/51 rule, which limits the participation of a foreign investor in local companies to 49%. In addition to this, foreign bidders for public contracts are now required to find local partners. After a sharp reduction in 2012, new FDI inflows increased again during the first semester of 2013, surpassing EUR 2 billion. The total for the entire year should reach EUR 3 billion. The authorities are trying to improve the investment climate in 2014 and to develop partnerships among public companies and foreign entities. Despite a substantial potential, the business climate still needs to make progress. Algeria ranks 153 out of 189 countries in the classification Doing Business 2014 issued by the World Bank. Investors could also become more cautious after the hostage-taking incident at the gas site of In Amenas which ended up tragically (40 dead victims) in January 2013. Following this drama, the oil companies Statoil and BP withdrew their personnel. The site should restart its operations in the first months of 2014. Lastly, an oil field of about 1.3 billion barrels was discovered in December 2013, this discovery should attract new investors. 

A series of protectionist measures taken by the Algerian government, as well as corruption, heavy bureaucracy, a weak financial sector and the legal insecurity in terms of intellectual property rights are hindrances to investment. Officially, the government remains committed to its economic liberalization and continues to seek foreign investment in sectors such as infrastructures, telecommunications, energy and water supply. Currently, the sectors attracting most FDI are the energy sector, followed by the telecommunications and tourism sectors.
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