An ancient town in the M’Zab Valley. Algeria’s economy is making a gradual recovery from the pandemic. (photo: Leonid Andronov.)
December 3, 2021/IMF
By Mahmoud Harb
IMF Middle East and Central Asia Department
The Algerian economy is gradually recovering from the initial impact of the pandemic and last year’s oil price shock. The health crisis has eased, most containment measures have been lifted, and domestic production of vaccines is supporting immunization efforts. With the rebound in hydrocarbon production and prices, growth has resumed, but the outlook is highly uncertain.
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The government’s policy response helped cushion the economy. However, the 2020 shocks exacerbated the economy’s longstanding imbalances, accelerating the rise in government debt and the fall in international reserves. Therefore, policy recalibration is needed to safeguard macroeconomic stability. The Government Action Plan that was unveiled in September incorporates wide-ranging reforms to support the recovery, unleash new growth drivers, and bolster governance and social cohesion. Progress on these reforms is also crucial for transitioning to a more stable, diversified and inclusive growth model.
Algeria has many untapped sources of growth and jobs. Developing them requires a profound transformation of the economy and diversifying it away from hydrocarbons. The recovery from the pandemic provides a unique opportunity for Algeria to rebuild resilience and harness the potential from its dynamic youth.