Country Report Algeria

Outlook for 2008-09

• 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.

Monthly review

• 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%.

SOURCE: Country Report