The Fall 2024 ÐÓ°ÉÂÛ̳ Economic Update underlines Algeria's robust economic performance while highlighting the need for a comprehensive policy framework to diversify Algeria's exports for sustainable growth.
ALGIERS, November 18, 2024 ¡ª Algeria¡¯s economy grew by 3.9 percent in the first half of 2024 compared to the same period last year, with broad-based growth supported by a resilient agricultural sector despite decreasing hydrocarbon production. The country saw a notable improvement in price stability, with inflation easing to 4.3 percent over the first nine months of 2024, reflecting the stabilization of fresh food prices, moderating import costs, and a stable exchange rate, according to the .
Lower hydrocarbon exports, higher imports, and rising public spending reduced the current account surplus and increased the fiscal deficit. Foreign exchange reserves remain comfortable, standing at 16.2 months of imports of goods and services as of September 2024.
With more substantial export revenues, the recovery in hydrocarbon output is expected to spark a growth rebound in 2025. However, faster import growth may result in a current account deficit and reduce foreign exchange reserves. A prudent public expenditure policy for 2025 would help reduce the budget deficit and limit the increase of the national debt.
"Hydrocarbon prices and their effect on revenues, public spending, and imports remain the main risk to the macroeconomic outlook. Additional risks from climate change underline the importance of integrating climate risks into the national development strategy," observed Cyril Desponts, ÐÓ°ÉÂÛ̳ Senior Economist for Algeria.
Algeria's non-hydrocarbon export growth potential is significant. Diversifying products and export markets while increasing value added will be crucial to achieving the government's target of $29 billion in non-hydrocarbon exports by 2030. To achieve this goal, establishing a comprehensive macroeconomic policy framework focused on boosting corporate productivity, enhancing export competitiveness, and strengthening integration into global value chains should be prioritized.
The global switch to cleaner production is set to impact products that generate high carbon emissions. This shift is particularly important as Europe, Algeria's main trading partner, introduces new carbon taxes at its borders. These measures could significantly affect Algerian exports, since most of the country's non-oil exports to Europe are carbon-intensive products.
"With carbon-intensive products such as fertilizers and cement representing the bulk of Algeria¡¯s non-hydrocarbon exports, the transition to greener production methods, and implementation of explicit carbon pricing are essential for long-term export sustainability," said Kamel Braham, ÐÓ°ÉÂÛ̳ Resident Representative for Algeria.
