Algeria has one of the largest economies in Africa. In 2021, it had the
on the African continent after Nigeria, Egypt, and South Africa. In terms of
, the country ranked second in North Africa after Libya. In 2020, the coronavirus (COVID-19) outbreak negatively affected the
, which contracted by around five percent compared to 2019. However, economic recovery and steady growth was projected in the following years.
Rising prices and inflation
In Algeria, consumer prices have risen in recent times. After remaining relatively under control between 2000 and 2020, the
inflation rate in the country increased to almost nine percent in 2022. As in most countries worldwide, the rising inflation was triggered by the COVID-19 pandemic and the Russia-Ukraine war, which led to supply chain disruptions and increase in energy prices. Algeria's
consumer price index (CPI) grew from 220 points in January 2020 to almost 250 index points in January 2022, showing that the purchasing power of consumers in the country gradually shrank.
Oil industry: opportunities and threats
As a member of the Organization of Petroleum Exporting Countries (OPEC), Algeria's economy relies significantly on hydrocarbons, especially on the
natural gas industry. The hydrocarbon sector largely contributes to the GDP and foreign trade, with fuels and oil being the
leading products exported from the country. However, the oil and gas industry also threatens the local economy. Fluctuating global oil and energy prices resulted in an increasingly shrinking industrial sector and economic instability. The country’s
trade balance has been negative since 2015 and the
budget deficit is projected to worsen. Furthermore, relying on the capital-intensive hydrocarbon industry aggravates
unemployment, with the rate being especially high among youth and women. With a large and increasingly growing population, the country needs to accelerate economic growth.
Importance of diversification
Economic diversification is a key challenge for Algeria. The country has attempted to develop economic sectors other than hydrocarbons. For instance, the Algerian service sector grew in recent years and
employed nearly 60 percent of the workforce in 2019. While there is still room for further development, services have become the
leading economic sector in the country since 2012, accounting for almost half of the GDP. Agriculture represents another driver of economic growth, as its
GDP contribution has also expanded constantly. By boosting agricultural production, the country can reduce its
dependence on food imports and improve self-sufficiency.
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