IMF says Algeria’s mid-term economic outlook will depend on efforts made to diversify the economy and the government’s capacity to attract private investment.

The International Monetary Fund (IMF) issued a statement last week predicting that the Algerian economy will grow by 3.8% in 2024 and 3.1% in 2025, supported by substantial government budget spending. However, the global financial institution emphasized that the medium-term economic outlook for the country hinges on efforts to diversify the economy and the government's ability to draw in private investments. These findings were part of the conclusions from consultations with Algerian authorities under Article IV of the IMF's statutes.

The IMF pointed out several risks that could sway these prospects, including persistent inflation, the volatility of international hydrocarbon prices, fiscal risks associated with the state's conditional commitments, significant budgetary financial needs, and rising public debt. Extreme weather events and a disorderly energy transition were also noted as potential economic and budgetary hazards.

On a positive note, the IMF identified factors that could further boost growth and job creation. These include sustained, bold, and comprehensive structural reforms, along with determined efforts to diversify the economy, enhance the business environment, attract investments, and tap into new export markets.

The IMF also highlighted Algeria's economic performance in 2023, noting a growth of 4.2%, driven largely by a rebound in hydrocarbon production and strong performances in the industrial, construction, and service sectors. Specifically, the hydrocarbon sector grew by 4.5% over the past year and is expected to continue this trend with a 2.7% increase in 2024. Non-hydrocarbon sectors experienced a 4.1% growth in 2023 and are projected to see a 4% increase in 2024.

Inflation in Algeria is projected to start a downward trend from 2024, decreasing to 7.6%, and is expected to gradually reduce to 5.5% by 2027, according to the IMF.