Algeria is making progress on diversifying beyond oil and gas—but sustaining that momentum will require a stronger private sector, more robust public finances, and better investment management
Algeria is one of Africa’s biggest energy exporters, with close ties to European energy markets. Hydrocarbons have long supplied most exports and much of public revenue, and have helped finance infrastructure, skills, and other priority investments. The opportunity now is to build on those strengths while creating new sources of growth that make the economy more resilient, as noted in the IMF’s recent Article IV assessment of the Algerian economy.
The authorities’ economic strategy rests on large investment projects and on nonhydrocarbon production and exports. The projects range from mining, food and water security to major upgrades in transport and trade infrastructure. To facilitate them, the authorities have streamlined procedures, strengthened governance, and made trade easier, including through recent investment, land and mining reforms, and a one-stop digital platform for investment, with the goal of helping firms invest, expand, and compete.
There are encouraging signs that these efforts are beginning to bear fruit. The nonhydrocarbon shares of real GDP and goods exports have risen gradually, and nonhydrocarbon export revenues have grown over the past decade. Even so, hydrocarbons still dominate exports; and the remainder is dominated by a handful of other products. The export base is broadening, but slowly.
Helping investment deliver lasting gains
Large projects can expand productive capacity, improve connectivity, and open new opportunities. They also require significant financing. In recent years, investment expansion has added to import demand and broader fiscal and external pressures. Getting the biggest return from these projects will require careful planning, prioritization, and implementation.
That makes the choice of projects as important as the amount spent. Directing money to those with the greatest economic impact would deliver stronger and more durable gains and help keep priority projects affordable. The full benefits of today’s investment will depend on whether it raises productivity, creates jobs, and helps build a more dynamic private sector.
