Algeria Emerges from the Shadows: Algeria's Economic Development Took a Serious Hit When Civil War Broke out in the Early 1990s. with Domestic Tensions Easing, the Country Has Launched a Bid to Diversify Its Oil- and Gas-Dependent Economy, Unveiling Ambitious Plans to Open Up the County to Foreign Visitors

By Kan, Charlotte | The Middle East, June 2012 | Go to article overview

Algeria Emerges from the Shadows: Algeria's Economic Development Took a Serious Hit When Civil War Broke out in the Early 1990s. with Domestic Tensions Easing, the Country Has Launched a Bid to Diversify Its Oil- and Gas-Dependent Economy, Unveiling Ambitious Plans to Open Up the County to Foreign Visitors


Kan, Charlotte, The Middle East


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Algeria has the eighth-largest reserves of natural gas in the world, is the fourth-largest gas exporter and ranks 16th in oil reserves according to OPEC. Hydrocarbons are the backbone of the economy, generating around 60% of budget revenues, more than 30% of GDP, and over 95% of exports. In order to lessen its reliance on global oil and gas demand, the government has made greater efforts since the mid-1990s to diversify the economy by attracting foreign and domestic investment outside the energy sector.

In 2010, Algeria launched a five-year, $286 billion development programme to update the country's infrastructure and boost employment levels by encouraging local business development, as well as education and housing projects. The Ministry of Transport in Algeria has allocated a budget of $9.6 billion for large transport infrastructure projects such as the modernisation of airports, ports and railways, and will invest a further $8.2 billion on larger projects such as the east-west motorway. Overall, public spending has increased by 27% annually during the past five years.

These initiatives are slowly bearing fruit, and GDP growth, which stood at 2.5% in 2011, is accelerating. The International Monetary Fund (IMF) forecasts GDP growth to reach 3.1% in 2012 and 3.4% in 2013. Thanks to its hydrocarbon exports, Algeria owns around $170 billion of foreign currency reserves, which puts it in 10th place globally, even ahead of former colonial power France. Moreover, the country benefits from very low debt, which stands at a meagre 2% of its $180 billion annual GDP: Algeria is a "rich" country.

However, Algeria's wealth is poorly distributed and a third of the population lives on less than $2 a day. The government still employs nearly a third of the workforce. Food price inflation is creeping, as in other North African countries, and has led to protests and riots. At more than 10%, unemployment remains high, in particular amongst the youth, where it stands at around 21% on paper, though it is said to be closer to 30-40% in reality. The young, jobless population is often described as a "timebomb", and in a paper entitled Unemployment and Labour Market Issues in Algeria, issued in April this year, the IMF warns this is a problem the country should tackle, or risk facing unrest in the street, as was seen in neighbouring Tunisia, Libya and Morocco.

"Despite several years of sustained growth, the unemployment rate in Algeria remains high compared to other emerging economies. In addition, while growth performance in the last 10 years was accompanied by a significant reduction in the overall unemployment rate, youth joblessness has proven more difficult to tackle as evidenced by the fact that the ratio of youth unemployment to overall unemployment has steadily increased over the recent period," the IMF notes.

Ambitious development plans for tourism

Given the popularity of tourism in the region, developing the local industry is seen as a way to answer many of Algeria's economic and social woes.

Algeria definitely has potential, with 1,200 kilometres of Mediterranean coastline and a mild, sunny climate. It offers a great variety of landscapes, from mountains to the dunes of the Sahara desert, which covers four fifths of the land. It shares borders with Morocco, Libya, Tunisia, Mauritania, Mali and Niger, and has several national parks and natural reserves with stunning scenery. According to various travel guides including the popular Lonely Planet "Algeria is one of the most fascinating countries in North Africa".

"In the dramatic Unesco-listed Tassili N'Ajjer and Hoggar regions, near the town of Tamanrasset, tribal culture is very much alive, and the day-to-day hassle common to many Arab countries is conspicuously absent. Algiers contains a vivid mix of tradition and modernism, its colonial past maintaining a presence. Timimoun embodies the storybook oasis town of the Sahara, and the welcoming town of In Salah is split in two by a creeping sand dune", the guide notes. …

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Algeria Emerges from the Shadows: Algeria's Economic Development Took a Serious Hit When Civil War Broke out in the Early 1990s. with Domestic Tensions Easing, the Country Has Launched a Bid to Diversify Its Oil- and Gas-Dependent Economy, Unveiling Ambitious Plans to Open Up the County to Foreign Visitors
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