Context Amidst a wave of change reverberating throughout the region, Algeria is faced two main challenges in 2011: rising food prices and high unemployment rate. The Algerian government introduced several measures to alleviate the rise of consumer prices. Authorities instituted price ceilings on sugar, oil and wheat products; some measures only remaining in effect from January 1, 2011 to August 31, 2011. Emergency measures included tax breaks such as the lifting of 5% import duty and the 17% VAT on basic food stuff. Furthermore, the government suspended the 19% tax on company profits for production activities and 25% tax for distribution activities. In addition to the rising food prices, unemployment remains one of the main challenges of Algeria today. Despite a steady decrease from 29% in 2000, 15.3% in 2005 to 10.2% at the end of 2009, unemployment among women and youth currently remain high at 21%. Furthermore, the skills mismatch between the opportunities provided by the market and the supply of labor are a source of growing dissatisfaction among educated youth. Authorities have put in place measures to tackle unemployment by creating jobs in the agriculture sector and by financing public works. 100,000 new farms of various sizes were developed in the medium-term to create an estimated 300,000 jobs. Under the five-year development plan, the construction of housing and public facilities is expected to create up to 2.5 million new jobs. In addition, the authorities are allocating over US$3 billion for the creation and financing of small and medium enterprise, industries and micro-businesses. In 2010, Algeria posted its second fiscal deficit in over a decade at 3.9% of GDP. However, Algeria holds significant resources to finance its deficit and fiscal policy will remain expansionary in 2010-14. Key spending items include public investment (39.2% of total expenditure, 16.6% of GDP), the wage bill (26.8% of total spending, 11.3% of GDP) and current transfers, which include sizeable social transfers and subsidies (27% of total spending and 11.4% of GDP). The medium-term outlook remains positive, but challenges linger: Reducing economic and spatial disparities and generating employment for the increasingly educated and young labor force. Algeria’s economy depends on the stability of hydrocarbon prices, access and quality of basic services and development of the country’s infrastructure. These structural reforms will aid in bolstering growth in the non-hydrocarbon sector and diversifying Algeria’s economy. Algeria is on a steady path to meeting the Millennium Development Goals. The country has made strong gains in poverty reduction, access to universal education and gender equality. Improvements have also been made in the health sector and in reducing the spread of HIV/AIDS. While there has been progress towards gender equality, Algeria is still lagging behind other middle income countries in terms of women’s economic and political empowerment. Algeria continues to rank low in the United Nations Human Development Index (104th among 182 countries), which assesses a person’s ability to develop their full potential and lead productive, creative lives in line with needs and interests. Strategy Since 2005, World Bank’s activities have focused on analytical work and Reimbursable Technical Assistance following the Government of Algeria’s decision to drastically refrain from external financing. The last International Bank for Reconstruction and Development financed project in Algeria closed in February 2009. Going forward, the World Bank’s strategy will focus on the following three objectives: - 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 spacial disparity issues, help develop competitiveness centers or ecotourism 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.Â
The International Finance Corporation (IFC) has a major presence in Algiers co-located with the World Bank office. In FY10, IFC’s committed portfolio declined to $82 million following the closure of two projects. The current portfolio consists of equity investments and loan in the 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 to 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 2011 For more information, please contact:
In Washington:Â Thoko Moyo, tmoyo@worldbank.org
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