Algeria: Boosting productivity to achieve sustainable and diversified growth

Algeria's economy maintained its momentum in 2024 with non-hydrocarbon GDP expanding by 4.8 percent, driven by strong public investment and robust household consumption. Inflation eased significantly to 4.0 percent in 2024, partly due to the strong performance of the agricultural sector despite limited rainfall, supporting a slowdown in food prices, according to the World Bank's latest economic update for Algeria.
Real GDP growth is projected to moderate to 3.3 percent in 2025 as extractive sectors recover, but public investment consolidates. If global oil prices were to remain low, external and fiscal deficits could expand in 2025.
A contraction in hydrocarbon output and rising imports led to the return of a modest current account deficit, a decline in foreign exchange reserves, and a widening fiscal deficit.
'Algeria's growth path continues to be solid. However, the fiscal and external balance remain highly sensitive to oil and gas prices,' said Kamel Braham, World Bank Resident Representative for Algeria. 'Accelerating structural transformation is essential to build resilience and support sustainable growth.'
Looking ahead, the report outlines several priorities to support long-term growth. It stresses the need to enhance productivity and gradually shift employment toward sectors with higher value-added, to help reduce reliance on public spending and hydrocarbons while making the economy more adaptable to future shocks.
'Productivity gains, particularly in manufacturing and services, are essential to unlock Algeria's growth potential,' observed Cyril Desponts, Senior Economist for Algeria. 'A shift toward higher-value-added sectors, supported by a progressive fiscal rebalancing, targeted reforms to boost private investment, and a skill development strategy, will be key to building a more resilient economy.'
To achieve sustained growth acceleration, the report highlights the importance of strengthening the macroeconomic policy framework and economic governance, strategically investing in human capital, and promoting foreign investment to foster the transfer and diffusion of productive technologies and management practices across the economy, a key mechanism underpinning the graduation of middle-income countries to high-income status.
Distributed by APO Group on behalf of The World Bank Group.

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