March 29, 2024 - Washington, DC The International Monetary Fund’s (IMF) Executive Board has finalized its 2023 Article IV consultation with Algeria, marking a significant assessment of the nation’s economic health post-pandemic and amidst global challenges.
Despite the lingering effects of the Covid-19 pandemic and the economic repercussions of the conflict in Ukraine, Algeria has demonstrated resilience. The nation’s economy grew by an estimated 4.2 percent in 2023, bolstered by a surge in hydrocarbon production and robust activity in industry, construction, and services. This growth contributed to a solid external position, with Algeria posting a current account surplus for the second consecutive year.
However, the economy faces persistent inflationary pressures, primarily driven by high food prices, while the fiscal deficit has expanded, though less than anticipated. Looking ahead, the outlook for 2024 remains optimistic with expected real growth of 3.8 percent, supported by substantial fiscal expenditure. Inflation is projected to slow down, particularly due to decreasing fresh food prices, but concerns linger over its potential entrenchment at high levels.
Algeria’s medium-term economic prospects are contingent on diversification efforts and the attraction of private investment. Downside risks include persistent inflation, fluctuating hydrocarbon prices, fiscal contingencies, and the impact of extreme climate events. Conversely, comprehensive structural reforms and proactive economic diversification could enhance growth and job creation.
The IMF Executive Board endorsed the staff’s positive appraisal of Algeria’s economic performance, while cautioning against high inflation and various risks. Directors urged for a balanced policy approach and continued reforms to ensure macroeconomic stability and inclusive growth. They also highlighted the need for fiscal policy adjustments to maintain sustainability and address climate change challenges effectively.
In conclusion, the IMF’s assessment underscores the importance of vigilant economic management and strategic reforms to navigate the uncertainties ahead and secure a prosperous future for Algeria.
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