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Algeria is open for business
The hydrocarbons sector is the backbone of Algeria's economy, accounting for 25% of GDP, 57% of government revenues, and nearly all export earnings.
Algeria has the fifth largest reserves of natural gas in the world and ranks fourteenth in oil. In addition, the Algerian energy minister recently announced the country is planning to become one of the world's biggest exporters of liquefied natural gas (LNG) within four years.
In an interview with Oil&Gas Middle East, Lucie Mboto Fouda, senior press officer of the International Monetary Fund (IMF), commented on Algeria's promising future...
How far can Algeria's economic upturn, following years of civil war and political unrest, be attributed to strong oil and natural gas export revenues?
Algeria's growth performance over the recent years benefited from a favorable external environment, appropriate macroeconomic policies, and strong hydrocarbon revenues.
Economic growth has been encouraging during the last 5 years - at an average annual rate of about 5.5% - because of both higher hydrocarbon output growth and strong activity in the nonhydrocarbon sector.
The momentum in nonhydrocarbon growth comes mainly from the significant fiscal stimulus generated by the government's Economic Recovery Program and the Growth Consolidation Program, financed by higher hydrocarbon revenue.
However, there are also welcome signs of a pickup in private activity both in the industrial and services sectors.
By how much has Algeria's sharp increase in oil export revenues over the last few years caused the country's foreign reserves to increase?
With high world hydrocarbon prices, gross external reserves have increased to about $80 billion from $4.4 billion in 1999.
Have high oil prices provided Algeria with an opportunity to make progress on implementing reforms and addressing the country's problems?
Algeria's key economic challenge remains to sustain high and durable growth through the expansion of private economic activity in the non-hydrocarbon sector.
The considerable increase in hydrocarbon export receipts in recent years provides the opportunity to invest in infrastructure, strengthen social services delivery and undertake market-based structural reforms to diversify the economy and create jobs.
The authorities have started to address this challenge. The prudent management of hydrocarbon wealth has preserved macroeconomic stability with low inflation and a strong external position.
At the same time, a good part of the hydrocarbon revenue is being used for large public investments in key areas of such as infrastructure, housing, education, and healthcare. Equally important are the ongoing structural reforms to complete the transition to an open, market-based economy.
Priorities are: (a) financial sector modernisation, (b) further trade liberalisation by joining the World Trade Organisation and strengthening regional integration; and (c) substantial improvement of the business climate, in particular by streamlining the tax system.
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