Rebound in oil & gas to fuel Algerian economy
Algeria is the fourthlargest economy on the continent after South Africa, Nigeria and Egypt and the second largest in North Africa. The Algerian economy benefits from its vast natural resources. Hydrocarbons reserves currently represent around 31% of GDP and more than 60% of the Government's revenue.
Benefiting from political stability, Algeria's economy continued to perform solidly in 2014, growing by 3.8% (3.0% in 2013). Growth was driven by private demand and investment by public enterprises, which offset a downturn in public expenditure and exports, especially oil and gas. After stabilizing at 10% between 2010 and 2012, unemployment fell slightly in 2014, standing at 9.6%.
Inflation returned to its pre-2012 level, falling from 8.9% to 3.3% thanks to a prudent monetary policy, fiscal consolidation and government measures to control and improve distribution channels for consumer goods.
Recent developments and prospects
With oil and gas production on the wane, national energy consumption on the rise and oil and gas exports falling both by volume (-7.4%) and by value (-10.3%), the Algerian economy's vulnerability to fluctuations in this sector increased in 2013, but was lastly contained during 2014, highlighting the urgent need for diversification and structural transformation of the economy, since private-sector development and diversification of sources of growth are hindered by a business environment that needs pursuing the major reforms launched by the Government.
Agriculture (10% of GDP in 2013) saw an acceleration of growth from 6.3% in 2012 to 9.4% in 2013. All areas of agriculture grew except cereal production (-4%) and tobacco (-5%).
The industrial sector still contributes less than 5% to GDP, but grew strongly during the year 2014. According to the industrial production index produced by the National Statistic Office, the steel, metal, mechanical, electronic and electrical industries grew by 12.5%; chemicals, rubber and plastics grew by 7.5%; and wood, cork and paper grew by 7.3%. Thanks to the major infrastructure projects carried out as part of the five-year 2010-14 Public Investment Program, construction and public works grew by 8.2% in 2012 (up from 5.2% in 2011), providing 9.6% of GDP. Services, meanwhile, provided 41% of GDP in 2012, with market services growing by 4.2% to provide 23% of GDP and government services growing by 6.4% to provide 18% of GDP.
Algeria's external financial position is nevertheless strengthened by foreign exchange reserves worth $196 billion, or nearly three years of imports, and by very low external debt, estimated at $3.2 billion (1.5% of GDP) as of end-2013.
Indeed, in 2015 growth is expected to be higher than in the previous two years, reaching 4.3%. It will be driven by public investment and supported by a rebound in oil and gas, which is expected to grow by around 2%. Excluding oil and gas growth
should reach 5.3%.
Government’s pro-investment measures should attract foreign investors. These include the ANDI's one-stop shop, simpler customs procedures, attractive tax laws, the decentralization of investment functions, a skilled workforce and integrateddevelopment industrial zones. The Algerian Government has put in place mechanisms aiming to cut down the bureaucracy in customs procedures and business registration.
The issue of industrial land seems to have been resolved since ANIREF was set up in 2008 to provide intermediation and regulate land, bringing an end to restricted public auctions for land.
Hydrocarbon sector accounts for about 30% of the country's gross domestic product (GDP), more than 95% of export earnings, and 60% of budget revenues.
As of January 2014, Algeria was estimated to hold 12.2 billion bbls of proved crude oil reserves. Despite huge production, this estimate has been unchanged for many years because of constant discoveries. Algeria produced approximately 1.2 million bpd of crude oil in 2013 but roughly two thirds of Algerian territory remains underexplored or unexplored.
Most crude exports are sent to neighboring Europe countries (Spain, Italy, France), with the remainder to the Americas and Asia & Oceania.
Algeria is a leading natural gas producer in Africa, the secondlargest natural gas supplier to Europe, and is among the top three oil producers in Africa. The country is also estimated to hold the third-largest amount of shale gas resources in the world. If gross natural gas and crude oil production have gradually declined in recent years, mainly because new production and infrastructure projects have taken time to be received, the Ministry of Energy announced that the country will be ready to grow its production 40% by 2019.
In 2013, Algeria revised parts of the hydrocarbon law. The government stated it needs foreign partners to increase oil and gas reserves and explore new territories, such as offshore in the Mediterranean Sea and onshore areas containing traditional oil and gas resources.
Algeria's government is attempting to reduce the country's dependence on natural gas in the power sector by initiating more renewable energy projects. Soneglaz, Algeria's state electricity and gas utility, has signed contracts to bring online solar, biomass and wind farm pilot programs and projects.
Phosphate and fertilizers
Algerian Government has repeatedly invited foreign companies to give bigger focus on the partnership opportunities offered by Algeria particularly in the field of mines. Algeria is developing its export of fertilizer and ammonia capacities in order to become by 2020 one of the most important players in the global market. Algeria has extensive reserves of phosphates (2 billion proven tons)
The government wants exports of phosphates to rise to 30 million tons a year by 2020. This would make Algeria the third largest phosphate producer in the world, after the United States and China. The authorities estimate sales could generate USD 7-8 billion a year".
For this purpose, Asmidal, a public company specialized in the production, marketing and developing fertilizers, ammonia and their derivatives, have sold shares to foreign players and in return, the letters invested millions of USD in the renovation of the production tool, building new plants for the production of ammonia.
With the economic opening and liberalization of the market, Asmidal is no longer the only provider of fertilizer; private companies have invested the market.
Bilateral Cooperation: Towards new perspectives
Algeria and India are focusing on the need to strengthen economic cooperation both in terms of mechanisms and legal framework, and it is in this context that both the parties agreed to hold the 9th session of Algeria-India Joint Commission, in Algiers on May 25-26, 2015. On this occasion, the bilateral cooperation in many fields will be reviewed and discussed and important bilateral agreements will be signed. Nirmala Sitharaman, Minister of State of Commerce and Industry of India, will co-chair the session.
It is worth mentioning the participation of India as Guest of Honor in the 48th International Trade Faire 2015, scheduled to be held from May 26 to June 1, 2015. This event, in which participation of more than 60 Indian companies is so far confirmed, will certainly be a platform of interaction between Economic players of the two countries when the capabilities of Indian companies will be showcased and more visible to the Algerian economic players. In the sidelines of this prestigious event, a meeting of Algeria-India Joint Business Council will take place (the last meeting was held in 2003).