Economics Affairs

World Bank: Algeria's economy predicted to grow by 1.9% in 2020

APS - 10 October 2019

ALGIERS- The Algerian economy is predicted to grow by 1.9% in 2020, up 0.2 point, said the World Bank, which added that the national GDP rose by 1.5% in 2018.

In its report on the Economic Outlook in Algeria (October 2019), the World Bank said that the growth of Gross Domestic Product in Algeria stood at 1.5% in 2018, against 1.4% in 2017. Growth stabilized at 1.5% in the first quarter of 2019, which means a stagnation induced by a “slow" growth of hydrocarbon sector.

"Growth in the hydrocarbon sector was sluggish, with economic activity contracting by 6.5 percent and 7.7 percent in 2018 and Q1-2019, respectively, partially offsetting the slight increase in non-hydrocarbon growth of 3.4 percent and 3.9 percent in 2018 and Q1-2019," said the World Bank.

However, investments increased by 4.9% compared to the first quarter 2019, said the report which underlined "remarkable progress" compared to 0.2% of the first quarter of 2018. A remarkable increase compared to the 0.2 percent of Q1-2018 - driven by public investment in the construction, public works and hydraulics sector with the expansion of social housing program was recorded, said the World Bank.

Sectors of commercial services, industry, construction and public works, agriculture continue to drive non-hydrocarbon growth with respectively 5.6%, 4.6%, 3% and 2.7% compared to the first quarter 2019. The Bretton Woods institution said that the arrest of business leaders over cases of corruption, had led to "economic disruptions" in Algeria.

The current account deficit is expected to widen to 8.1 percent of GDP, mainly on the back of a substantially larger trade deficit, said the WB. However, the recent discovery of a new gas field provides hope for a rebound in gas production and exports, but only in the medium term and only if the hydrocarbon investment framework is conducive, it added.

With regard to inflation, the World Bank said that it remained stable at 4.3 percent in 2018, and has declined to 4.1 percent in end-March 2019, "despite the expansionary monetary policy under the “unconventional financing” by the central bank, amounting to 32 percent of GDP of which half has been already injected in the economy. "

Recalling that "Algeria’s economy remains highly dependent on hydrocarbons, and on global oil and gas prices," the World Bank recommends to anchor fiscal policy in a medium-term framework to insulate the economy from oil price volatility.