The International Monetary Fund (IMF) has issued a cautious assessment of Algeria’s economy, stressing that the nation’s reliance on oil and gas revenues continues to leave it vulnerable to external shocks.
The warning comes in the IMF’s annual report following its Article IV consultations.
The report notes that while Algeria has taken steps to support economic recovery, including modest diversification initiatives, the underlying fragility of the economy remains. Real GDP growth reached 3.6% in 2024, slightly down from 4.1% in 2023, and is forecasted at 3.4% for 2025.
“This performance, which is above the global average, nevertheless masks the fragility of an economy where the slightest variation in hydrocarbon prices leads to immediate imbalances,” the IMF said.
The institution highlighted that a sharp drop in oil prices in 2014 had previously triggered a severe budget crisis, forcing the government to rely heavily on foreign exchange reserves.
Today, although reserves remain robust in the short term, declining hydrocarbon revenues combined with rising public spending have widened a budget deficit the IMF describes as “worrying.”
The report calls for “energetic measures” to rationalize spending and increase non-hydrocarbon revenues, particularly through the reform of energy subsidies, which remain a sensitive social issue.
On monetary policy, the IMF welcomed the decline in inflation to 4.4% in 2024, down from 7.1% in 2023, largely due to falling food prices. However, it cautioned that external risks—including the war in Ukraine and recurring droughts—could destabilize prices, recommending increased flexibility in the dinar exchange rate.
The IMF also acknowledged some progress in banking supervision, anti-money laundering efforts, and limited economic diversification, but noted that reforms remain tentative. Bureaucracy and the dominance of state-owned enterprises continue to hamper private sector growth.
“The underlying warning is clear: without deep and rapid structural reforms, Algeria risks repeating the scenario of 2014–2016, when falling oil prices exposed the limitations of a hydrocarbon-dependent economy,” the report concluded, underscoring the urgency for decisive action.
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