Country Report Algeria June 2009

Summary

The president, Abdelaziz Bouteflika, will remain in power in 2009-10 after securing a third term in the presidential election in April, following several amendments to the constitution approved by parliament in November.
Armed Islamist groups will continue to pose a threat to general security, following a number of bomb attacks and ambushes over the past three years, but they do not constitute a fundamental risk to political stability.
Fiscal policy will remain strongly expansionary. Reduced oil and gas revenue, owing to lower hydrocarbons prices, will lead to the central government budget posting a deficit in both 2009 and 2010.
Domestic demand will remain robust, but an expected slowdown in investment and export growth will push GDP growth down to 2.8% in 2009. However, it is forecast to recover to 4.3% in 2010 as oil output rises.
The Algerian dinar is likely to stabilise against the US dollar over the remainder of 2009 and during 2010. Against the euro, the dinar is forecast to depreciate gently in 2009 and 2010.
In 2009-10 lower oil and gas prices will lead to a sharp contraction in the trade surplus, to around US$14.5bn from US$39.1bn in 2008. This will result in a concomitant narrowing of the current-account surplus.

Leaders of the ruling coalition parties of the presidential alliance have voiced their support for the government's programme following the presidential election in April.
Despite expectations among French and Algerian officials, Mr Bouteflika is yet to confirm his trip to Paris in June. The trip would be likely to involve a number of large commercial agreements.
The government has outlined details of its US$150bn spending programme, which aims to diversify the economy away from the hydrocarbons sector through social spending, modernisation of the banking sector and agriculture.
The government has implemented policies that are likely to lower imports by offering incentives to local producers but discouraging foreign entrants.
Sonatrach, the state oil and gas company, and international oil companies, have awarded several contracts, continuing the revival of construction activity in the sector, which is related to lower construction and equipment costs.
Government plans to develop a nationwide railway network have progressed with the inauguration of new lines, tenders for additional links and related tenders for electrification and rolling stock.

This report covers the following industry codes:
SIC Code: 60;37
NAICS Code: 52;336