Economy of Algeria
Encyclopedia
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
. The reserves are mostly in the Eastern Sahara
Sahara
The Sahara is the world's second largest desert, after Antarctica. At over , it covers most of Northern Africa, making it almost as large as Europe or the United States. The Sahara stretches from the Red Sea, including parts of the Mediterranean coasts, to the outskirts of the Atlantic Ocean...
; the Algerian government curbed the exports in the 1980s to slow depletion; exports increased again somewhat in the 1990s. Other significant exports are sheep
Domestic sheep
Sheep are quadrupedal, ruminant mammals typically kept as livestock. Like all ruminants, sheep are members of the order Artiodactyla, the even-toed ungulates. Although the name "sheep" applies to many species in the genus Ovis, in everyday usage it almost always refers to Ovis aries...
, ox
Ox
An ox , also known as a bullock in Australia, New Zealand and India, is a bovine trained as a draft animal. Oxen are commonly castrated adult male cattle; castration makes the animals more tractable...
en, and horse
Horse
The horse is one of two extant subspecies of Equus ferus, or the wild horse. It is a single-hooved mammal belonging to the taxonomic family Equidae. The horse has evolved over the past 45 to 55 million years from a small multi-toed creature into the large, single-toed animal of today...
s; animal products, such as wool
Wool
Wool is the textile fiber obtained from sheep and certain other animals, including cashmere from goats, mohair from goats, qiviut from muskoxen, vicuña, alpaca, camel from animals in the camel family, and angora from rabbits....
and skins; wine
Wine
Wine is an alcoholic beverage, made of fermented fruit juice, usually from grapes. The natural chemical balance of grapes lets them ferment without the addition of sugars, acids, enzymes, or other nutrients. Grape wine is produced by fermenting crushed grapes using various types of yeast. Yeast...
, cereals (rye
Rye
Rye is a grass grown extensively as a grain and as a forage crop. It is a member of the wheat tribe and is closely related to barley and wheat. Rye grain is used for flour, rye bread, rye beer, some whiskeys, some vodkas, and animal fodder...
, barley
Barley
Barley is a major cereal grain, a member of the grass family. It serves as a major animal fodder, as a base malt for beer and certain distilled beverages, and as a component of various health foods...
, oat
Oat
The common oat is a species of cereal grain grown for its seed, which is known by the same name . While oats are suitable for human consumption as oatmeal and rolled oats, one of the most common uses is as livestock feed...
s), vegetable
Vegetable
The noun vegetable usually means an edible plant or part of a plant other than a sweet fruit or seed. This typically means the leaf, stem, or root of a plant....
s, fruit
Fruit
In broad terms, a fruit is a structure of a plant that contains its seeds.The term has different meanings dependent on context. In non-technical usage, such as food preparation, fruit normally means the fleshy seed-associated structures of certain plants that are sweet and edible in the raw state,...
s (chiefly fig
Ficus
Ficus is a genus of about 850 species of woody trees, shrubs, vines, epiphytes, and hemiepiphyte in the family Moraceae. Collectively known as fig trees or figs, they are native throughout the tropics with a few species extending into the semi-warm temperate zone. The Common Fig Ficus is a genus of...
s and grape
Grape
A grape is a non-climacteric fruit, specifically a berry, that grows on the perennial and deciduous woody vines of the genus Vitis. Grapes can be eaten raw or they can be used for making jam, juice, jelly, vinegar, wine, grape seed extracts, raisins, molasses and grape seed oil. Grapes are also...
s for the table) and seed
Seed
A seed is a small embryonic plant enclosed in a covering called the seed coat, usually with some stored food. It is the product of the ripened ovule of gymnosperm and angiosperm plants which occurs after fertilization and some growth within the mother plant...
s, esparto
Esparto
Esparto, or esparto grass, also known as "halfah grass" or "needle grass", Macrochloa tenacissima and Stipa tenacissima, is a perennial grass grown in northwest Africa and the southern part of the Iberian Peninsula employed for crafts .-Esparto paper:It is also used for fiber production for paper...
grass, oils and vegetable extracts (chiefly olive oil
Olive oil
Olive oil is an oil obtained from the olive , a traditional tree crop of the Mediterranean Basin. It is commonly used in cooking, cosmetics, pharmaceuticals, and soaps and as a fuel for traditional oil lamps...
), iron
Iron
Iron is a chemical element with the symbol Fe and atomic number 26. It is a metal in the first transition series. It is the most common element forming the planet Earth as a whole, forming much of Earth's outer and inner core. It is the fourth most common element in the Earth's crust...
ore, zinc
Zinc
Zinc , or spelter , is a metallic chemical element; it has the symbol Zn and atomic number 30. It is the first element in group 12 of the periodic table. Zinc is, in some respects, chemically similar to magnesium, because its ion is of similar size and its only common oxidation state is +2...
, natural phosphate
Phosphate
A phosphate, an inorganic chemical, is a salt of phosphoric acid. In organic chemistry, a phosphate, or organophosphate, is an ester of phosphoric acid. Organic phosphates are important in biochemistry and biogeochemistry or ecology. Inorganic phosphates are mined to obtain phosphorus for use in...
s, timber
Timber
Timber may refer to:* Timber, a term common in the United Kingdom and Australia for wood materials * Timber, Oregon, an unincorporated community in the U.S...
, cork
Cork (material)
Cork is an impermeable, buoyant material, a prime-subset of bark tissue that is harvested for commercial use primarily from Quercus suber , which is endemic to southwest Europe and northwest Africa...
, crin vegetal and tobacco. The import of wool exceeds the export. Sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
, coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, machinery, metal work of all kinds, clothing and pottery are largely imported. Of these by far the greater part comes from France. The British
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
imports consist chiefly of coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
, cotton fabrics and machinery.
Algeria trades most extensively with France and Italy, in terms of both imports and exports, but also trades with the United States and Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
. Algeria currently has only one stock exchange, the Algiers Stock Exchange.
Historical trend
The total imports and exports on the eve of the French invasion (in 1830) did not exceed £175,000. By 1850, the figures had reached £5,000,000; in 1868, £12,000,000; in 1880, £17,000,000; and in 1890, £20,000,000. From this point progress was slower and the figures varied considerably year by year. In 1905 the total value of the foreign trade was £24,500,000. About five-sixths of the trade is with or via France, into which country several Algerian goods have been admitted duty-free since 1851, and all since 1867. French goods, except sugarSugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
, have been admitted into Algeria without payment of duty since 1835. After the 1892 increase of the French minimum tariff which applied to Algeria for the first time, foreign trade greatly diminished.
GDP per capita grew 40 percent in the Sixties reaching a peak growth of 538% in the Seventies But this proved unsustainable and growth collapsed to a paltry 9.7% in the turbulent Eighties.
Failure of timely reforms by successive governments caused the current GDP per capita to shrink by 28% in the Nineties.
This is a chart of trend of gross domestic product of Algeria at market prices estimated by the International Monetary Fund with figures in millions of Algerian Dinars.
| Year | Gross Domestic Product | US Dollar Exchange | Inflation Index (2000=100) |
Per Capita Income (as % of USA) |
|---|---|---|---|---|
| 1980 | 162,500 | 3.83 Algerian Dinars | 9.30 | 18.51 |
| 1985 | 291,600 | 4.77 Algerian Dinars | 14 | 15.55 |
| 1990 | 554,400 | 12.19 Algerian Dinars | 22 | 10.65 |
| 1995 | 2,004,990 | 47.66 Algerian Dinars | 73 | 5.39 |
| 2000 | 4,123,514 | 75.31 Algerian Dinars | 100 | 5.17 |
| 2005 | 7,493,000 | 73.44 Algerian Dinars | 114 | 7.43 |
For purchasing power parity comparisons, the US Dollar is exchanged at 70.01 Algerian Dinars only (updated May 24, 2007). Average wages in 2007 hover around $18–22 per day.
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
in April 1994 and the following year signed onto a three-year extended fund facility which ended 30 April 1998. In March 2006, Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
agreed to erase $4.74 billion of Algeria's Soviet-era debt during a visit by President Vladimir Putin
Vladimir Putin
Vladimir Vladimirovich Putin served as the second President of the Russian Federation and is the current Prime Minister of Russia, as well as chairman of United Russia and Chairman of the Council of Ministers of the Union of Russia and Belarus. He became acting President on 31 December 1999, when...
to the country, the first by a Russian leader in half a century. In return, president Abdelaziz Bouteflika
Abdelaziz Bouteflika
Abdelaziz Bouteflika is the ninth President of Algeria. He has been in office since 1999. He continued emergency rule until 24 February 2011, and presided over the end of the bloody Algerian Civil War in 2002...
agreed to buy $7.5 billion worth of combat planes, air-defence systems and other arms from Russia, according to the head of Russia's state arms exporter Rosoboronexport. Some progress on economic reform, Paris Club
Paris Club
The Paris Club is an informal group of financial officials from 19 of some of the world's biggest economies, which provides financial services such as war funding, debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors...
debt rescheduling
Debt rescheduling
Debt rescheduling is the lengthening the time of debt repayment and forgiving, or dismissing, part of the loan for a date....
s in 1995 and 1996, and oil and gas sector expansion contributed to a recovery in growth since 1995, reducing inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
to approximately 1% and narrowing the budget deficit. Algeria's economy has grown at about 4% annually since 1999. The country's foreign debt has fallen from a high of $28 billion in 1999 to its current level of $5 billion. The spike in oil prices in 1999-2000 and the government's tight fiscal policy, as well as a large increase in the trade surplus and the near tripling of foreign exchange reserves has helped the country's finances. However, an ongoing drought, the after effects of the November 10, 2001 floods and an uncertain oil market make prospects for 2002-03 more problematic. The government pledges to continue its efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector.
Abdelaziz Bouteflika
Abdelaziz Bouteflika is the ninth President of Algeria. He has been in office since 1999. He continued emergency rule until 24 February 2011, and presided over the end of the bloody Algerian Civil War in 2002...
has announced sweeping economic reforms, which, if implemented, will significantly restructure the economy. Still, the economy remains heavily dependent on volatile oil and gas revenues. The government has continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector, but has had little success in reducing high unemployment and improving living standards. Other priority areas include banking reform, improving the investment environment, and reducing government bureaucracy.
The government has announced plans to sell off state enterprises: sales of a national cement factory and steel plant have been completed and other industries are up for offer. In 2001, Algeria signed an Association Agreement with the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
; it has started accession negotiations for entry into the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
.
Gross domestic product (GDP)
In 2007 Algeria’s estimated GDP was US$125.9 billion according to the official exchange rate. Using purchasing power parity, estimated GDP was US$268.9 billion, or US$8,100 on a per capita basis. The estimated real growth rate was 4.6 percent. In 2007 industry accounted for 61 percent of GDP, services constituted 31 percent, and agriculture provided the remaining 8 percent.The country has enjoyed several years of strong economic performance, with solid non-hydrocarbon growth, low inflation, an overall budget surplus of 8percent of GDP and a positive trade balance of 28 percent of GDP in 2008. Average annual non-hydrocarbon GDP growth averaged 6 percent in 2003-2007, with total GDP growing at an average of 4.5 percent during the same period due to less buoyant oil production in 2006-07. External debt has been virtually eliminated, and the government has accumulated large savings in the oil stabilization fund (FRR). Inflation, the lowest in the region, has remained stable at 4 percent on average for 2003-07. However, the economy remains highly dependent on hydrocarbons, which represent 98 percent of total exports; a continued slowdown of global energy demand would therefore significant pressure on Algeria’s fiscal and external positions.
Government budget
In 2007 government revenues of US$58.5 billion exceeded expenditures of US$41.4 billion. Receipts from the hydrocarbons industry usually account for roughly 60 percent of revenues.Agriculture, forestry, and fishing
Algeria’s agricultural sector, which contributes about 8 percent of gross domestic product (GDP) but employs 14 percent of the workforce, is unable to meet the food needs of the country’s population. As a result, some 45 percent of food is imported. The primary crops are wheat, barley, and potatoes. Farmers also have had success growing dates for export. Cultivation is concentrated in the fertile coastal plain of the Tell region, which represents just a slice of Algeria’s total territory. Altogether, only about 3 percent of Algerian territory is arable. Even in the Tell, rainfall variability has a significant impact on production. Government efforts to stimulate farming in the less arable steppe and desert regions have met with limited success. However, herdsmen maintain livestock, specifically goats, cattle, and sheep, in the High Plateaus region.
Algeria’s climate and periodic fires are not conducive to a thriving forestry industry. However, Algeria is a producer of cork and Aleppo pine. In 2005 roundwood removals totaled 7.8 million cubic meters, while sawnwood production amounted to only 13 million cubic meters per year.
Algeria’s fishing industry
Fishing industry
The fishing industry includes any industry or activity concerned with taking, culturing, processing, preserving, storing, transporting, marketing or selling fish or fish products....
does not take full advantage of the Mediterranean coast, in part because fishing is generally done from small family-owned boats instead of large commercial fishing trawlers. However, the government is attempting to boost the relatively small catch—slightly more than 125,000 metric tons in 2005—by modernizing fishing ports, permitting foreigners to fish in Algerian waters, and subsidizing fishing-related projects.
Fishing
Fishing is a flourishing but minor industry. Fish caught are principally sardineSardine
Sardines, or pilchards, are several types of small, oily fish related to herrings, family Clupeidae. Sardines are named after the Mediterranean island of Sardinia, around which they were once abundant....
s, bonito
Bonito
Bonito is a name given to various species of medium-sized, predatory fish in the Scombridae family. First, bonito most commonly refers to species in the genus Sarda, including the Atlantic bonito and the Pacific bonito ; second, in Japanese cuisine, bonito refers to the skipjack tuna , which, in...
, mackerel
Mackerel
Mackerel is a common name applied to a number of different species of fish, mostly, but not exclusively, from the family Scombridae. They may be found in all tropical and temperate seas. Most live offshore in the oceanic environment but a few, like the Spanish mackerel , enter bays and can be...
smelt and sprats. Fresh fish are exported to France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, dried and preserved fish to Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
and Italy
Italy
Italy , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
. Coral fisheries
Fishery
Generally, a fishery is an entity engaged in raising or harvesting fish which is determined by some authority to be a fishery. According to the FAO, a fishery is typically defined in terms of the "people involved, species or type of fish, area of water or seabed, method of fishing, class of boats,...
are found along the coast from Bona
Bona
- Places :* The former name of Annaba, a city in northeastern Algeria* Bona, Sweden, a town in Östergötland County, Sweden- Persons :* Bona of Pisa - Places :* The former name of Annaba, a city in northeastern Algeria* Bona, Sweden, a town in Östergötland County, Sweden- Persons :* Bona of Pisa -...
to Tunis
Tunis
Tunis is the capital of both the Tunisian Republic and the Tunis Governorate. It is Tunisia's largest city, with a population of 728,453 as of 2004; the greater metropolitan area holds some 2,412,500 inhabitants....
. The annual catch averages around 142,000 tons, 54% sardines.
Minerals
Algeria is rich in minerals; the country has many iron, leadLead
Lead is a main-group element in the carbon group with the symbol Pb and atomic number 82. Lead is a soft, malleable poor metal. It is also counted as one of the heavy metals. Metallic lead has a bluish-white color after being freshly cut, but it soon tarnishes to a dull grayish color when exposed...
, zinc, copper
Copper
Copper is a chemical element with the symbol Cu and atomic number 29. It is a ductile metal with very high thermal and electrical conductivity. Pure copper is soft and malleable; an exposed surface has a reddish-orange tarnish...
, calamine
Calamine (mineral)
Calamine is a historic name for an ore of zinc. The name calamine was derived from the Belgian town of Kelmis, whose French name is "La Calamine", which is home to a zinc mine...
, antimony
Antimony
Antimony is a toxic chemical element with the symbol Sb and an atomic number of 51. A lustrous grey metalloid, it is found in nature mainly as the sulfide mineral stibnite...
and mercury
Mercury (element)
Mercury is a chemical element with the symbol Hg and atomic number 80. It is also known as quicksilver or hydrargyrum...
mines. The most productive are those of iron and zinc. Lignite is found in Algiers; immense phosphate beds were discovered near Tébessa
Tébessa
Tébessa is the capital city of Tébessa Province, Algeria, 20 kilometers west from the border with Tunisia. Nearby is also a phosphate mine. The city is famous for the traditional Algerian carpets in the region, and is home to over 161,440 people.-History:...
in 1891, yielding 313,500 tons in 1905. Phosphate beds are also worked near Sétif
Sétif
Sétif |Colonia]]) is a town in northeastern Algeria. It is the capital of Sétif Province and it has a population of 239,195 inhabitants as of the 1998 census. Setif is located to the east of Algiers and is the second most important Wilaya after the country's capital. It is 1,096 meters above sea...
, Guelma
Guelma
Guelma is the capital of Guelma Province and Guelma District, located in northeastern Algeria, about 65 kilometers from the Mediterranean coast...
and Aïn Beïda
Aïn Beïda
Aïn Beïda is a city and municipality located in Oum El Bouaghi Province, Algeria, south east of Constantine and north of Khenchla, inhabitated by Chaouis. As of 1998 its population was 88,300.-Etymology:...
. There are more than 300 quarries which produce, amongst other stones, onyx
Onyx
Onyx is a banded variety of chalcedony. The colors of its bands range from white to almost every color . Commonly, specimens of onyx contain bands of black and/or white.-Etymology:...
and beautiful white and red marble
Marble
Marble is a metamorphic rock composed of recrystallized carbonate minerals, most commonly calcite or dolomite.Geologists use the term "marble" to refer to metamorphosed limestone; however stonemasons use the term more broadly to encompass unmetamorphosed limestone.Marble is commonly used for...
s. Algerian onyx from Ain Tekbalet was used by the Romans, and many ancient quarries have been found near Sidi Ben Yebka
Sidi Ben Yebka
Sidi Ben Yebka is a town and commune in Oran Province, Algeria. According to the 1998 census it has a population of 5893....
, some being certainly those from which the long-lost Numidian marbles were taken. Salt
Salt
In chemistry, salts are ionic compounds that result from the neutralization reaction of an acid and a base. They are composed of cations and anions so that the product is electrically neutral...
is collected on the margins of the chotts.
Banking and finance
Algeria’s banking sector is dominated by public banks, which suffer from high levels of non-performing loans to state-owned enterprises (SOEs). As of 2007, public banks controlled 95 percent of total bank assets. In 2007 nonperforming loans represented a towering 38 percent of total loans at public banks, according to International Monetary Fund (IMF) estimates. Modest progress has been made in implementing several reforms proposed by the IMF, including replacing bank credits to SOEs with government subsidies; boosting bank supervision, accountability, and transparency; and modernizing the payments system. One specific reform that has been achieved is the establishment in 2006 of the Algerian Real Time Settlements system, which facilitates the prompt and reliable electronic transfer of payments. In November 2007, the proposed sale and privatization of Crédit Populaire d’Algérie was postponed because of turbulent market conditions. Recently, HSBC and Deutsche Bank announced that they would commence commercial banking (in the case of HSBC) and investment banking (in the case of Deutsche Bank) in Algeria. Only a few companies are listed on the underdeveloped and relatively opaque Algiers stock exchange.The non-bank sector remains less developed, although recent reforms in the field of regulation and supervision have laid the foundations for leasing, factoring, and venture capital.
The Algerian equity market remains relatively shallow, with only two companies being listed in the Bourse d’Algerie. Conversely, the bond market has expanded in recent years: the government has issued debt instruments with varying maturities of up to fifteen years, and five private companies have issued corporate bonds.
The insurance sector was liberalized in 1995, but is still dominated by government-owned institutions and so far accounts only for a very small part of the economy: total premium volume amounted to approximately 1 percent of GDP. The pension sector encompasses three pension funds, which attained coverage of approximately 40 percent of the working population in 2005.
Based on 2006 and 2007 estimates, 31 percent of the total population has access to financial services, with one bank branch or post office every 7,250 inhabitants. The microfinance sector still has great potential for further development. A 2006 study could not find major regulatory impediments to microfinance and suggested that the geographical net of postal offices – offering an increasing number of financial services to customers – holds a high potential of increasing access to finance for the Algerian population.
Official remittance inflows increased steadily from USD 1.9 to 2.9 billion between 2005 and 2007.
Tourism
Algeria’s tourism industry, which contributes only about 1 percent of GDP, lags behind that of its neighbors Morocco and Tunisia. Algeria receives only about 200,000 tourists and visitors annually. Ethnic Algerian French citizens represent the largest group of tourists, followed by Tunisians. The modest level of tourism is attributable to a combination of poor hotel accommodations and the threat of terrorism. However, the government has adopted a plan known as “Horizon 2025,” which is designed to address the lack of infrastructure. Various hotel operators are planning to build hotels, particularly along the Mediterranean coast. Another potential opportunity involves adventure holidays in the south. The Algerian government has set the goal of boosting the number of foreign visitors, including tourists, to 1.2 million by 2010.Currency, exchange rate, and inflation
Algeria’s currency is the dinarAlgerian dinar
The dinar is the currency of Algeria and it is subdivided into 100 santeem .-History:The dinar was introduced on 1 April 1964, replacing the Algerian new franc at par.-Coins:...
(DZD). The dinar is loosely linked to the U.S. dollar in a managed float. Algeria’s main export, crude oil, is priced in dollars, while most of Algeria’s imports are priced in euros. Therefore, the government endeavors to manage fluctuations in the value of the dinar. As of April 2008, US$1 was equivalent to about DZD64.6.
Algeria’s foreign currency reserves have grown rapidly since 2000, reflecting rising prices for exported oil. At the end of 2007, foreign reserves totaled US$99.3 billion, up from US$12 billion in 2000 and the equivalent of almost four years of imports. In 2007 the estimated inflation rate was 4.6 percent.
In 2010, the IMF voiced concerns about poor management of Algeria's monetary system and inflation
Labor
The largest employer is government, which claims 32 percent of the workforce. Even though industry is a much larger part of the economy than agriculture, agriculture employs slightly more people (14 percent of the workforce) than industry (13.4 percent of the workforce). One of the reasons for this disparity is that the energy sector is very capital-intensive. Trade accounts for 14.6 percent of the workforce, while the construction and public works sector employs 10 percent, reflecting the government’s efforts to upgrade the country’s infrastructure and stock of affordable housing.At the end of 2006, the unemployment rate was about 15.7 percent, but the rate among those under the age of 25 was 70 percent. In 2005 the labor participation rate was only 52 percent, versus an Organisation for Economic Co-operation and Development average of 70 percent. New entrants to the workforce and the lack of emigration options make unemployment a chronic problem and an important challenge to the government. Given its highly capital-intensive nature, the hydrocarbons industry is not in a position to employ many job seekers.
Foreign economic relations
In its foreign economic relations, Algeria is seeking more trade and foreign investment. For example, Algeria’s hydrocarbons law passed in April 2005 is designed to encourage foreign investment in energy exploration. Increased production could raise Algeria’s profile as a member of the Organization of the Petroleum Exporting Countries. In keeping with its pro-trade agenda, Algeria achieved association status with the European Union (EU) in September 2005. Over a 12-year period, the association agreement is expected to enable Algeria to export goods to the EU tariff-free, while it gradually lifts tariffs on imports from the EU. Algeria has signed bilateral investment agreements with 20 different nations, including many European countries, China, Egypt, Malaysia, and Yemen. In July 2001, the United States and Algeria agreed on a framework for discussions leading to such an agreement, but a final treaty has not yet been negotiated. Ultimately, trade liberalization, customs modernization, deregulation, and banking reform are designed to improve the country’s negotiating position as it seeks accession to the World Trade Organization.In 2007 Algerian imports totaled US$26.08 billion. The principal imports were capital goods, foodstuffs, and consumer goods. The top import partners were France (22 percent), Italy (8.6 percent), China (8.5 percent), Germany (5.9 percent), Spain (5.9 percent), the United States (4.8 percent), and Turkey (4.5 percent). In 2007 Algeria exported US$63.3 billion, more than twice as much as it imported. Exports accounted for 30 percent of gross domestic product (GDP). Hydrocarbon products constituted at least 95 percent of export earnings. The principal exports were petroleum, natural gas, and petroleum products. The top export partners were the United States (27.2 percent), Italy (17 percent), Spain (9.7 percent), France (8.8 percent), Canada (8.1 percent), and Belgium (4.3 percent). Algeria supplies 25 percent of the European Union’s natural gas imports. In 2007 Algeria posted a positive merchandise trade balance of US$37.2 billion. In 2007 Algeria achieved a positive current account balance of US$31.5 billion. High prices for Algeria’s energy exports are the main driver for the improvement in the
current account balance.
Algeria's trade surplus for 2010 has risen to over $83.14 billion. The Algerian Centre for Information and Statistics Directorate of the Algerian Customs attribute this increase from last year due to higher fuel revenue due to the high price of a barrel of oil, and the slight decrease in imports of consumer non-food materials. The center said that Algerian exports rose by 78.26% during the period from January to November 2010 from $27.51 billion to $44.4 billion during the same period in 2009. Imports grew by 89.1% from $43.36 billion to $76.35 billion between 2009 and 2010.
Reflecting strong oil export revenues, external debt is on a downward trajectory. For example, these revenues facilitated early repayments of US$900 million in loans from the African Development Bank and Saudi Arabia. In March 2006, Algeria’s purchase of 78 aircraft from Russia led to the cancellation of Algeria’s entire debt to Russia. In 2006 external debt was estimated at US$4.4 billion, down from US$23.5 billion in 2003.
In 2006 foreign direct investment (FDI) in Algeria totaled US$1.8 billion. The petrochemical, transport, and utilities sectors have been recent beneficiaries of FDI. FDI into the oil sector was expected to rise as a result of a hydrocarbons law, approved in April 2005, that created a more even playing field for foreign oil companies to compete with Algeria’s state-owned oil company, Sonatrach, for exploration and production contracts. Algeria also is seeking foreign investment in power and water systems.
As of August 2006, cumulative World Bank assistance to Algeria totaled US$5.9 billion, encompassing 72 projects. Currently, the World Bank is pursuing seven projects, specifically budget modernization, mortgage finance, natural disaster recovery, energy and mining, rural employment, telecommunications, and transportation. In 2005 economic assistance to Algeria from the United States amounted to US$4.4 million, most of which was attributable to the Middle East Partnership Initiative (MEPI) and the remainder to International Military Education and Training (IMET). MEPI encourages economic, political, and educational reform in the Middle East. In 2006 IMET, which provides U.S. military training to foreign troops, had a budget of US$823 million. In 2005 the European Union contributed US$58 million to Algeria’s economic development under the Euro-Mediterranean Partnership.
Works cited
- Algeria country profile. Library of CongressLibrary of CongressThe Library of Congress is the research library of the United States Congress, de facto national library of the United States, and the oldest federal cultural institution in the United States. Located in three buildings in Washington, D.C., it is the largest library in the world by shelf space and...
Federal Research DivisionFederal Research DivisionThe Federal Research Division is the research and analysis unit of the United States Library of Congress.The Federal Research Division provides directed research and analysis on domestic and international subjects to agencies of the United States government, the District of Columbia, and...
(May 1, 2006).