Activity accelerated, and macroeconomic equilibria improved, although private investment and diversification remain necessary for long-term growth, according to the World Bank.
ALGIERS, 22 June 2023 – Algeria's economy showed sustained growth in 2022, as outlined in the World Bank’s latest Algeria Economic Update. The pace of nonhydrocarbon economic activity accelerated in 2022, buoyed by a rebound in agricultural production and sustained private consumption growth. Indications of cross-regional growth are extending into the first quarter of 2023. The increase in natural gas export prices has helped offset the dip in oil prices, enabling high export levels, a rapid accumulation of foreign reserves, and a reduction in the budget deficit.
The report highlights that Algeria's gross domestic product (GDP) growth has reached 3.2% in 2022. The growth of non-hydrocarbon sectors accelerated, with a 4.3% growth compared with 2.3% for 2021. The current account surplus reached 9.5% of GDP in 2022, allowing foreign exchange reserves to reach USD 61.7 billion or 15.8 months of imports at the end of 2022.
Inflation in Algeria remained high, driven by rising prices of fresh food products. The authorities have resorted to exchange rate and monetary policies to curb inflation and raised public spending to support household purchasing power.
Looking forward, growth in 2023 is expected to be driven mainly by non-hydrocarbon sectors, despite the impact of low rainfall on agricultural production. The anticipated reduction in hydrocarbon export prices would decrease the current account balance, which would remain positive.
"Despite positive recent macroeconomic developments, Algeria's economic prospects remain sensitive to volatile oil prices, thus the importance of the continued implementation of reforms to enable the private sector to become the driver of sustainable growth and economic diversification," underscored Kamel Braham, World Bank's Resident Representative in Algeria.
The sustained improvement in the trade balance and the accumulation of foreign exchange reserves have strengthened the resilience of Algeria's economy in the face of external shocks, but macroeconomic equilibria remain sensitive to global oil prices in a context of significant global uncertainty.
"The dynamism of the country's economic activity is evident, although reductions in oil production and the impact of low rainfall on the agricultural sector have affected the growth forecast for 2023. However, the sustained increase in gas export prices supports more optimistic projections for the trade balance, foreign reserves, budget deficit, and public debt than previously expected”, added Cyril Desponts, World Bank's Country Economist for Algeria.
