The Spring 2024 Algeria Economic Update underscores the country's dynamic economic activity and slowing inflation while highlighting the importance of data in supporting Algeria’s efforts toward sustainable, diversified growth.
Algeria's economic growth remained dynamic in 2023, with GDP recording a 4.1 percent increase driven by robust performance in both nonhydrocarbon and hydrocarbon sectors, according to the World Bank's report. Economic activity was stimulated by dynamic private consumption and strong investment growth, leading to a marked increase in imports. Hydrocarbon production was bolstered by record-high natural gas production, which compensated for the decline in crude oil production amidst voluntary OPEC quota reductions.
Despite a decline in global hydrocarbon prices and an increase in imports causing Algeria’s trade balance to shrink, the country's foreign reserves continued to grow, reaching 16.1 months of imports by the end of 2023. Consumer price inflation moderated to 5.0 percent in the first quarter of 2024, down from 9.3 percent in 2023, aided by a strong dinar and lower fresh food and import prices.
The report emphasizes the strategic importance of data for informing policy decisions and leveraging alternative data sources to provide insights into real-time economic developments in Algeria. These sources include satellite data on nighttime lights and crop development as well as shipping vessel data at Algerian ports. Such information complements conventional economic statistics but highlights that improving official economic data availability remains crucial.
"In 2022 and 2023, Algerian authorities accelerated digitalization efforts and elevated strengthening data systems as a policy priority," said Kamel Braham, the World Bank’s Resident Representative to Algeria. "In addition to supporting evidence-based policymaking, robust economic data reduces economic uncertainty and supports investment, growth, and diversification."
Looking ahead, the report projects a temporary growth slowdown in 2024 followed by robust recovery in 2025. Despite this positive outlook, it notes that continued public spending and import growth amidst moderating hydrocarbon exports would put renewed pressure on fiscal and trade balances. Additionally, significant uncertainties remain regarding global commodity prices and climate conditions.
Cyril Desponts, the World Bank’s Senior Economist for Algeria emphasized alternative data sources' usefulness: "Unconventional data bring precision to our analysis because they are highly disaggregated across time and space with only short delays." He added that early-2024 data suggest activity remained dynamic nationwide but less so in oil-producing regions affected by quota reductions while Eastern regions saw improved rainfall aiding crop development.
The report also highlights recent reforms aimed at supporting diversification through accelerating private sector investment outside hydrocarbons. The measures include the 2022 Investment Law, the 2023 Banking and Monetary Law, formal adhesion to Africa Continental Free Trade Agreement (AfCFTA), the new Land Law of 2023 as well as state-owned bank reforms intended to boost private investment essential for fostering diversification given constraints on public investment due to expanding current expenditures.
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