## IMF Executive Board Concludes 2023 Article IV Consultation with Algeria

_IMF News, March 29, 2024_

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## Bibliographic details
- Published: March 29, 2024

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### Economic overview and near-term outlook
- Algerian economy estimated to have grown by 4.2 percent in 2023, driven by a rebound in hydrocarbon production and strong performance in industry, construction, and service sectors.
- Near-term growth forecast: 3.8 percent in 2024, supported in part by large fiscal spending.
- Inflation: period average consumer price index 6.1 in 2023; forecast 5.5 percent in 2024, 5.2 percent in 2025, and 5.0 percent subsequently. Inflation pressures persisted in 2023, primarily due to high food prices; easing fresh food prices expected to help decelerate inflation, though entrenchment at a relatively elevated level is a concern.
- External position: current account surplus for the second year in a row in 2023; surplus projected to narrow in 2024 as hydrocarbon prices decline.
- Public finances: fiscal deficit estimated to have widened in 2023, but less than foreseen in the 2023 revised budget due to relatively slow execution rates.

### Risks and medium-term prospects
- Downside risks highlighted:
  - Stubborn inflation.
  - Volatility in international hydrocarbon prices.
  - Fiscal risks from contingent liabilities and large budgetary financing needs.
  - Rising public debt.
  - Extreme climate events affecting the economy and budget.
  - Disorderly energy transition as a longer-term risk.
- Upside scenario:
  - Sustained, bold, and deep structural reforms to diversify the economy, improve the business climate, attract investment, and tap new export markets could spur growth and job creation.

### Executive Board assessment and policy recommendations
- General assessment:
  - Directors welcomed Algeria’s sustained solid growth and external position despite multiple economic headwinds.
  - Emphasized that a sound policy mix and sustained implementation of reforms are necessary to ensure macroeconomic stability and promote inclusive and sustainable growth.
- Fiscal policy recommendations:
  - Authorities encouraged to gradually rebalance fiscal policy to preserve buffers and improve fiscal and debt sustainability, while ensuring targeted support for the most vulnerable.
  - Emphasized fiscal role in climate mitigation and adaptation, including reforming the energy subsidies and undertaking a C-PIMA.
  - Recommended improving public financial management and establishing a rules-based medium-term fiscal framework.
- Monetary and exchange rate policy recommendations:
  - Proactive tightening of monetary policy through raising the policy rate and reserve ratio, combined with continued liquidity absorption, to support disinflationary efforts.
  - Strengthen the monetary transmission mechanism and specify price stability as the primary objective of monetary policy.
  - Greater exchange rate flexibility recommended to enhance the exchange rate’s role as a shock absorber.
  - Directors welcomed adoption of the Monetary and Banking Law aimed at modernizing financial markets and central bank operations and governance.
- Financial sector and structural reforms:
  - Reinforce bank supervision, monitor NPLs, and strengthen governance of state-owned banks and other SOEs to reduce systemic risks from links between government, public enterprises, and state-owned banks.
  - Further improvements in financial inclusion.
  - Continue reforms to boost investment, improve fiscal transparency, strengthen the AML/CFT framework, and address governance and corruption risks.
  - Prioritize structural reforms to improve the business environment, support youth and women labor force participation, and promote diversified, green, and private sector–led growth.
  - Improve the coverage and timeliness of statistics, supported by Fund capacity development.

### Key macroeconomic figures (selected)
- Output and prices (annual percentage change):
  - Real GDP: 4.2 percent (2023); 3.8 percent (2024); 3.1 percent (2025); 2.5 percent (2026); 2.1 percent (2027).
  - Hydrocarbon sector growth: 4.5 percent (2023); 2.7 percent (2024); 1.5 percent (2025); 1.0 percent (2026); 0.5 percent (2027).
  - Nonhydrocarbon sector growth: 4.0 percent (2023); 3.3 percent (2024); 2.3 percent (2025).
  - Consumer price index (period average): 6.1 (2023); 5.5 (2024); 5.2 (2025); 5.0 (2026).
- Public finances:
  - Overall budget balance: -7.8 (2023); -6.7 (2024).
  - Gross government debt (excluding guarantees): 46.4 (2023); 49.7 (2024); 51.9 (2025); 54.5 (2026); 57.0 (2027); 59.5 (2029).
- External sector and commodities:
  - Savings-investment balance: 2.2 (percent of GDP, 2023); 0.1 (2024).
  - Exports, f.o.b. (percent change): -16.4 (2023).
  - Crude oil export unit value (US$/bbl): 84.0 (2023); 81.2 (2024); 77.1 (2025); 74.2 (2026); 72.4 (2027); 71.4 (2028); 70.9 (2029).
  - Gross official reserves: US$ 68.9 billion (2023); US$ 71.3 billion (2024); US$ 69.3 billion (2025); US$ 64.2 billion (2026); US$ 57.7 billion (2027); US$ 49.8 billion (2028); US$ 40.5 billion (2029).
- Money and credit:
  - Net foreign assets: -15.8 (2023).
  - Credit to the economy: 5.6 (2022).
- Memorandum:
  - GDP (in billions of dinars at current prices): 33,225 (2023); 36,764 (2024); 40,152 (2025); 43,634 (2026); 46,947 (2027); 50,347 (2028); 53,855 (2029).
  - GDP per capita (in US$): 4,982 (2022).

*IMF press release, March 29, 2024.*

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## References

- [Algeria and the IMF](http://www.imf.org/external/country/DZA/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
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_Source: https://www.imf.org/en/news/articles/2024/03/29/pr24100-imf-concludes-2023-article-iv-consultation-with-algeria_