Country Report Algeria February 2009

Outlook for 2009-10

• The president, Abdelaziz Bouteflika, will stand for a third term in April 2009 following several amendments to the constitution that were approved by parliament in November. He is likely to win the election by a large majority.
• Armed Islamist groups will continue to pose a threat to general security, following a number of bomb attacks over the past three years, but they do not constitute a fundamental risk for political stability.
• Fiscal policy will remain strongly expansionary, but reduced oil and gas revenue, owing to lower prices, are now forecast to lead to a central government budget deficit in both 2009 and 2010.
• Domestic demand will remain robust but an expected slowdown in investment and exports has led us to cut our forecast for real GDP growth to 2.2% in 2009, with a relatively strong recovery to 5.1% in 2010.
• The Algerian dinar is likely to depreciate on average against the US dollar in 2009-10. Against the euro, the dinar is forecast to appreciate in 2009.
• Lower oil and gas prices will lead to a sharp drop in the trade surplus to around US$15bn in 2009 from US$39.1bn in 2008. This will result in a concomitant narrowing of the current-account surplus.

Monthly review

• Abdelaziz Bouteflika is likely to face only token opposition when he stands for re-election for a third term in April. A number of prominent critics of the president have launched a boycott campaign.
• The government is aiming to invest up to US$150bn in infrastructure and development projects as part of a new growth-support plan for 2009-13.
• The finance minister, Karim Djoudi, has expressed concern about the increase in imports, which reached a record US$40bn in 2008.
• Despite the poor response to the recent oil and gas exploration bid round, Chakib Khelil, the energy and mining minister, has ruled out any major changes to the commercial terms for production-sharing agreements.
• The minimum capital requirement for banks has been increased fourfold to AD10bn (US$142m). Banks have 12 months in which to comply.
• The central bank governor, Mohammed Laksaci, has presented a generally positive assessment of Algeria's macroeconomic performance in 2008, including real non-hydrocarbons GDP growth of 6%.

This report covers the following industry codes:
SIC Code: 10
NAICS Code: 212