Country Report Algeria January 2010

Outlook for 2010-11

• The president, Abdelaziz Bouteflika, will remain in power in 2010-11 after securing a third term in the presidential election in April, following several amendments to the constitution approved by parliament in November 2008.
• There is likely to be persistent political tension in 2010-11, with indications of disunity within the presidential alliance and growing dissatisfaction with social conditions amid continued attacks on security targets by militants.
• Fiscal policy will remain strongly expansionary. Reduced oil and gas revenue, owing to lower hydrocarbons prices, will lead to central government budget deficits in both 2010 and 2011.
• GDP growth will rise to 4.6% in 2010, owing to continued robust government spending, investment projects and a recovering global economy, but will fall to 4.4% in 2011 as growth in global demand for hydrocarbons slows.
• The government will encourage a depreciation of the Algerian dinar against the US dollar and the euro during 2010 to help to reduce the import bill, but once exports have recovered, the dinar will be allowed to appreciate.
• In 2010-11 higher oil and gas prices will lead to a widening of the trade surplus, to an annual average of US$13.1bn from US$6.4bn in 2009. This will result in a concomitant improvement in the current account.

Monthly review

• Strikes have intensified as health workers joined teachers and other unions protesting against a 25% increase to the minimum wage, which was smaller than unions hoped for amid high inflation and unemployment.
• The US has agreed to supply arms to Algeria in a deal worth US$2-3bn. Terrorist activity has declined in Algeria but regional threats remain.
• The government has proposed increases to diesel and petrol prices, which could meet stiff resistance, and electricity prices are also likely to rise.
• The international arbitration case between Sonatrach, Gas Natural and Repsol, relating to a gas development, has finally been settled.
• The results of the eighth hydrocarbons-exploration bidding round have been disappointing, with licences for three of the ten blocks on offer being awarded.
• Speculation that Orascom Telecom Algeria may be sold has increased.
• The finance minister has revised down GDP growth estimates for 2009 and has announced figures that suggest imports have begun to contract.
• A local construction company has issued Algeria's fourth private bond.

• Highlights
• Outlook for 2010-11: Domestic politics
• Outlook for 2010-11: International relations
• Outlook for 2010-11: Policy trends
• Outlook for 2010-11: Fiscal policy
• Outlook for 2010-11: Monetary policy
• Outlook for 2010-11: International assumptions
• Outlook for 2010-11: Economic growth
• Outlook for 2010-11: In focus
• Outlook for 2010-11: Inflation
• Outlook for 2010-11: Exchange rates
• Outlook for 2010-11: External sector
• Outlook for 2010-11: Forecast summary
• The political scene: Late note
• The political scene: Strikes intensify following small minimum-wage increase
• The political scene: US arms deal is agreed and terrorist activity declines
• The political scene: Free movement demanded in exchange for EU energy deal
• Economic policy: Minimum-wage increase fails to placate unions
• Economic policy: Government plans increase in domestic energy prices
• Economic policy: In focus
• Economic policy: Gassi Touil arbitration finally settled
• Economic policy: Speculation increases over Orascom sale
• Economic performance: Wage increases could fuel inflation
• Economic performance: Growth figures revised down and imports falling
• Economic performance: Algeria's second private bond has been issued
• Data and charts: Annual data and forecast
• Data and charts: Quarterly data
• Data and charts: Monthly data
• Data and charts: Annual trends charts
• Data and charts: Monthly trends charts
• Data and charts: Comparative economic indicators
• Basic data
• Political structure