Hydrocarbons continue to provide most of Algeria’s export earnings and a substantial share of government revenue, despite gradual growth in nonhydrocarbon production.
The country is investing in mining, food and water security, transport and trade infrastructure to expand productive capacity and create new sources of economic growth.
Authorities have also introduced investment, land and mining reforms, streamlined procedures and established a digital one-stop platform for investors.
The nonhydrocarbon share of real gross domestic product and goods exports has increased, while export revenue from other sectors has grown during the past decade.
However, oil and gas continue to dominate exports, with the remaining export base concentrated in only a few products.
“The export base is broadening, but slowly,” IMF Economists Haris Tsangarides, François Painchaud and Véronique Salins said.
Large infrastructure projects could improve connectivity and create economic opportunities, but the investments require substantial financing and have increased imports and pressure on public finances.
The IMF said Algeria should prioritise projects capable of delivering the strongest economic returns, improving productivity and creating sustainable employment.
A more competitive private sector could help Algeria expand exports, including less carbon-intensive products, as global markets gradually shift towards lower-carbon economic activity.
Private companies require efficient infrastructure, predictable regulations, access to finance, appropriate skills and fair competition with state-owned enterprises.
Continued support for entrepreneurship could also help younger companies expand, adopt technology and enter new markets.
The IMF warned that persistent budget deficits and financing pressure could eventually make Algeria’s investment programme more difficult to sustain.
Gradual fiscal consolidation, stronger nonhydrocarbon revenue and more efficient public spending could preserve priority projects while protecting vulnerable households.
Algeria should also save more revenue during periods of high hydrocarbon prices to protect public investment when commodity prices decline. “Africa’s energy exporter has made encouraging progress towards a more diversified economy,” the IMF economists said.
–IMF/ChannelAfrica–
