Country Report Algeria

Summary

The threat to general security from the militant Islamist insurgency is likely to remain high in the near term, following a series of suicide attacks in 2007. However, this will not affect the stability of the regime.
The president, Abdelaziz Bouteflika, is expected to push through an amendment to the constitution enabling him to stand for a third term in 2009. This is likely to be approved by parliament, rather than by referendum.
Fiscal policy will remain strongly expansionary. The budget for 2008 included an increase in the threshold for general income tax from AD60,000 (US$920) a year to AD120,000.
Growth in the hydrocarbons sector is expected to pick up over the outlook period, which, together with strong government spending, will push real GDP growth up to 5.3% in 2008 and 6% in 2009.
Strong domestic demand will keep price pressures high in 2008, and the Economist Intelligence Unit expects average inflation this year to be around 5.3%, with a strong upside risk to the forecast, before easing slightly in 2009.
High international oil and gas prices mean that Algeria's current-account surplus is forecast to average 25.4% of GDP in 2008-09.

Clashes between the security forces and Islamist militants have continued, but the government claims that a senior commander of al-Qaida in the Islamic Maghreb has defected owing to his opposition to suicide bombings.
There has been a rash of civil disturbances, reflecting underlying discontent with economic conditions.
The interior minister has denied suggestions that the president, Abdelaziz Bouteflika, has reduced his workload owing to his worsening health.
A UK court is examining an Algerian government request for the extradition of Abdelmoumen Rafiq Khalifa in relation to the Khalifa Bank scandal.
The finance minister, Karim Djoudi, has ruled out the creation of a sovereign wealth fund.
The government is in talks with Asian and European automotive firms about establishing a vehicle assembly plant in Algeria.
Several international companies have submitted bids for a gas liquefaction plant at Arzew, as part of the reconfigured Gassi Touil project.
Oil and gas export revenue reached US$27.2bn in the first four months of 2008, a year-on-year increase of 56%.