An International Monetary Fund (IMF) mission led by Charalambos Tsangarides concluded its 2025 Article IV consultation with Algeria on June 30, 2025. The mission took place in Algiers from June 16 to June 30.
Following the mission, Mr. Tsangarides provided a statement regarding the economic situation in Algeria. "Economic activity eased to 3.6 percent in 2024 from 4.1 percent in 2023, as OPEC+ production cuts weighed on the hydrocarbons sector, while nonhydrocarbon activity remained strong, expanding by 4.2 percent," he noted.
He further explained that the current account balance turned to a deficit due to reduced hydrocarbon output and gas prices, although international reserves stayed robust at US$67.8 billion, covering about 14 months of imports.
Inflation saw a notable decline from an average of 9.3 percent in 2023 to 4 percent in 2024, primarily due to lower food prices, with core inflation also decreasing. Despite this, the budget deficit widened significantly in 2024 to reach 13.9 percent of GDP because of decreased hydrocarbon revenues and increased wage and investment spending.
Mr. Tsangarides highlighted that the near-term outlook remains positive with a gradual recovery in hydrocarbon production expected as OPEC+ production cuts ease, supporting growth into 2025 while keeping inflation moderate. However, fiscal pressures present financing challenges that could raise public debt over time if they persist.
The economic outlook faces risks mainly from volatile hydrocarbon prices amid changing trade policies and geopolitical tensions, alongside persistent fiscal deficits impacting debt sustainability and financial connections between government entities and state-owned enterprises (SOEs). "Medium-term economic prospects would improve with sustained reforms to diversify the economy," he added.
The IMF mission recommends fiscal rebalancing to curb rising financing needs driven by large deficits and falling hydrocarbon prices to reduce vulnerabilities and stabilize public debt over the medium term. Additionally, it suggests more exchange rate flexibility to enhance resilience against external shocks.
For long-term stability, priorities include enhancing fiscal sustainability and advancing structural reforms for private investment growth and job creation. Reforming subsidies is advised for rebuilding fiscal buffers and prioritizing expenditures like targeted support for vulnerable households.
Progress made under the Organic Budget Law of 2018 is acknowledged by Mr. Tsangarides: "The mission welcomes progress in implementing the...Law," which aims at improving transparency in budget execution among other goals.
Efforts by Algerian authorities to diversify their economy through initiatives such as digital real estate access are appreciated but come with caution against broad application of fiscal incentives that may cause revenue gaps.
In closing his statement, Mr. Tsangarides expressed gratitude towards Algerian authorities for their hospitality during discussions: “The mission expresses its gratitude...for their warm hospitality."