Context In a year that saw many countries in the Middle East and North Africa Region rocked by revolution, government changes and political reforms, Algeria has largely been exempt from large-scale unrest. Nonetheless, unemployment and an underperforming private sector remain key challenges for the oil exporting country, and government has slowly enacted structural reforms to bolster the non-hydrocarbon economy. In an effort to speed its integration with the global economy, Algeria has moved forward with reforms to become a WTO member, signing five additional bilateral trade agreements in the beginning of 2012.
Algeria continues to support the development and the financing of SMEs in the country in an effort to spur additional employment generation and private sector growth. According to official data, unemployment has been declining; reaching 10% in 2010, down from 10.2% in 2009, but youth unemployment remains high at 21% (2010). Furthermore, the skills mismatch and rigid labor market policies make it difficult for the young and growing workforce to find employment. The 2009-2014 development plan, or programme quinquenal, for the construction of housing and public facilities is expected to create up to 2 million new jobs. Algeria posted an estimated fiscal deficit of 4 % of GDP in 2011, the third consecutive deficit in over a decade. However, Algeria holds significant foreign exchange reserves, estimated at USD181.5 (2011), to finance its deficit and its expansionary fiscal policy.
Algeria’s economy depends on the stability of hydrocarbon prices, access to and quality of basic services and the development of the country’s infrastructure. GDP and non hydrocarbon GDP growth for 2011 were estimated at 2.5% and 4.9%, respectively. Inflation in 2010 was mostly fueled by a surge in fresh food prices, but decreased in 2011. However, current public spending could trigger an upward trend for 2012. The medium-term outlook remains positive, as Algeria will continue to benefit from high hydrocarbon prices. Added efforts will still be needed to reduce economic and regional disparities, and to generate sufficient employment for the increasingly educated and young labor force.
Algeria is on track to meet the Millennium Development Goals. The country has made strong gains in socio-economic indicators such as access to universal education and gender equality. Primary education rates were 96% and the ratio of female to males in primary education enrolment was0.94 in 2010. Improvements have also been made in the health sector and in reducing the spread of HIV/AIDS; however service delivery is still weak. While there has been progress towards gender equality, such as a 30% quota for women’s participation in political parties; Algeria is still lagging behind other middle income countries in terms of women’s economic and political empowerment. Algeria’s United Nations Human Development Index (96th among 187 countries) continues to improve and its HDI places it above the regional average. This index assesses a person’s ability to develop their full potential and lead productive, creative lives in line with needs and interests.
Strategy Since 2005, the World Bank’s activities in Algeria have focused on analytical work and Reimbursable Technical Assistance following the Government of Algeria’s decision to refrain from external financing. The last IBRD- financed project in Algeria closed in February 2009. The World Bank’s RTA and analytical work, as described in the Country Partnership Strategy for 2011-2014, is focused on:
- Strengthening Growth through Diversification of the Economy: Support the agricultural and rural development strategy, improve the investment climate – particularly for small and medium enterprises - and modernize the financial and banking sectors;
- Promoting Sustainable Development and Reducing Spatial Disparities: Provide technical assistance and support to implement environment protection initiatives and Government programs. For spatial disparity issues, help develop competitiveness centers or ecosystem preservation projects; and
- Strengthening the Institutions of Economic Planning, Monitoring, Evaluation and Policy-Making: Provide technical support to strengthen the planning, monitoring and evaluation capacity of various sectors in the Government.
The International Finance Corporation (IFC) in Algiers is co-located with the World Bank. In FY10, IFC’s committed portfolio was US$82 million and consisted of equity investments and loans in financial and cement sectors. In FY09, IFC had a record year in Algeria investing US$50 million in the ASEC Algeria cement plant and providing a U$10 million guarantee to a leasing company. IFC was instrumental in helping establish the first leasing company in Algeria. In FY08, IFC took an equity investment of US$15 million in a Greenfield Commercial Bank with a focus on housing finance and MSME banking. Furthermore, IFC invested US$20 million in two private equity funds that target small and medium enterprises in Algeria and the Maghreb region. IFC also provided advisory services in the following areas: agricultural linkages; simplification of business creation; capacity building and training for business associations; capacity building for exporters; small and medium enterprises toolkit installation; direct technical assistance on risk management; and small and medium enterprise financing. A joint World Bank–IFC project also provides assistance on corporate governance. Partners The World Bank regularly consults with government agencies, private sector, civil society and other development partners on their program in Algeria.
All dollar figures are in US dollar equivalents. Updated April 2012 For more information, please contact:
In Washington:Â Lara Saade, LSaade@worldbank.org
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