IMF Executive Board Concludes 2021 Article IV Consultation with Algeria
IMF News, November 22, 2021
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Bibliographic details
- Published: November 22, 2021
Overview
- Date of Executive Board conclusion: November 19, 2021.
- Context: Algeria recovering from the concomitant Covid-19 pandemic and oil shocks in 2020.
- Authorities’ response: Swift measures mitigated health and social impact; stepped-up vaccination and targeted containment measures helped slow down a third wave of infection.
Recent economic developments
- 2020 real GDP contraction: 4.9 percent.
- 2021Q1 real GDP growth (year-on-year): 2.3 percent.
- Drivers of 2021Q1 growth: Rebound in hydrocarbon prices and production; relaxation of containment measures.
- External current account balance: Improved significantly in the first six months of 2021 after a marked deterioration in 2020.
- Inflation drivers: Higher international food prices and an episode of drought in Algeria adversely affecting households’ purchasing power.
Ongoing vulnerabilities and risks
- Accumulated shocks since 2014 have increased vulnerabilities.
- Fiscal and external current account deficits: Continued large deficits in recent years reduced policy space.
- Public debt and reserves: Public debt increased significantly and international reserves declined.
- Outlook risks: Main risks are evolution of oil prices, the pandemic, and the social and geopolitical environment; risks are tilted to the downside.
Executive Board Assessment and guidance
- Directors’ overall view: Agreed with the thrust of the staff appraisal; commended authorities’ timely and comprehensive efforts to contain human and economic costs.
- Need for policy mix: Called for a well-calibrated policy mix to support macroeconomic stability and promote sustainable, resilient and inclusive growth.
- Fiscal policy:
- Agreed need for gradual and sustained fiscal consolidation underpinned by both revenue-enhancing and spending measures.
- Recommended adapting pace and composition of adjustment to the evolution of the pandemic and domestic conditions to protect the most vulnerable.
- Commended efforts to modernize budget management and improve public sector efficiency.
- Encouraged diversifying budget financing sources and avoiding central bank financing.
- Monetary and financial sector policy:
- Underscored that a well-calibrated monetary policy combined with greater exchange rate flexibility could support stabilization efforts.
- Encouraged reinforcement of bank supervision, implementation of a crisis management framework, and strengthening governance at state-owned banks.
- Welcomed forthcoming reforms to strengthen central bank independence.
- Structural and governance reforms:
- Commended strategy to revive growth and reduce dependence on hydrocarbons.
- Welcomed focus of the new Government Action Plan and agreed with identified reform priorities for a transition to more inclusive and sustainable growth.
- Noted recent announcements on strengthening transparency and the anti-corruption institutional framework, enhancing climate resilience, encouraging digitalization, foreign direct investment, and competition to foster private sector investment and job creation.
- Emphasized that strengthening the AML/CFT framework remains a priority.
Projections and key statistics (2019–22)
- Demographics and context:
- Population: 43.4 million; 2019
- Per capita GDP: US$ 3,940 (2019)
- Quota: SDR 1,959.9 million
- Gini coefficient: 0.28 (2015)
- Key export markets: EU
- Main exports: oil and gas
- Output:
- Real GDP growth (percent): 2019: 0.8; 2020: -4.9; 2021 Est.: 3.2; 2022 Proj.: 2.4
- Nonhydrocarbon GDP growth (percent): 2019: 2.0; 2020: -3.9
- Employment:
- Unemployment (percent, end of period): 2019: 11.4; 2020: …
- Prices:
- Inflation (percent, average): 2019: 6.5; 2020: 7.7
- Central government finances (percent of GDP):
- Total revenue: 2019: 32.3; 2020: 30.1; 2021 Est.: 28.0; 2022 Proj.: 27.6
- Of which, hydrocarbon: 2019: 13.1; 2020: 10.3; 2021 Est.: 11.1; 2022 Proj.: 12.4
- Total expenditure: 2019: 41.9; 2020: 39.8; 2021 Est.: 39.4
- Overall budget balance (deficit-): 2019: -9.6; 2020: -11.7; 2021 Est.: -11.8
- Gross government debt: 2019: 45.8; 2020: 50.7; 2021 Est.: 59.2; 2022 Proj.: 65.4
- Money and credit:
- Broad money (percent change): 2019: -0.8; 2020: 7.4; 2021 Est.: 17.0; 2022 Proj.: 13.3
- Credit to the economy (percent change): 2019: 9.0; 2020: 3.0; 2021 Est.: 1.8; 2022 Proj.: 5.6
- Balance of payments:
- Current account balance (percent of GDP): 2019: -9.9; 2020: -12.7; 2021 Est.: -3.6
- FDI (percent of GDP): 2019: 0.7
- Gross reserves (months of imports) 1/: 2019: 17.6; 2020: 12.5; 2021 Est.: 9.9
- External debt (percent GDP): 2019: 2.2; 2020: 1.9
- Exchange rate:
- REER average (percent change): 2019: 2.3; 2020: -4.6
1/ In months of next year's imports of goods and services.
Administrative note
- It is expected that the next Article IV consultation with Algeria will be held on the standard 12-month cycle.
IMF Communications Department — Press Release No. 21/341 (November 22, 2021).