Country Report Algeria March 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 to political stability.
• Fiscal policy will remain strongly expansionary. Reduced oil and gas revenue, owing to lower hydrocarbons prices, is 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 export growth will push GDP growth down to 2.2% in 2009. However, GDP growth is forecast to recover to 5% in 2010 as oil output rises.
• The Algerian dinar is likely to depreciate on average against the US dollar in 2009, before recovering slightly in 2010. Against the euro, the dinar is forecast to remain stable in 2009.
• In 2009 lower oil and gas prices will lead to a sharp contraction in the trade surplus, to around US$15.8bn from US$39.1bn in 2008. This will result in a concomitant narrowing of the current-account surplus.

Monthly review

• The president, Mr Bouteflika, officially declared his candidacy for the April presidential election on February 23rd, the formal deadline.
• In his manifesto, Mr Bouteflika promised to carry forward most of the policies from his current term, including those related to security and investment, and pledged a further US$150bn for infrastructure.
• Moussa Benhamadi, head of Algerie Telecom (AT), announced in February that the operator will no longer be considered for part-privatisation. AT has recently absorbed its online subsidiary, Djaweb Algerie Telecom Internet.
• The IMF has said that Algeria remains largely insulated from the impact of the global economic downturn, a view shared by the Economist Intelligence Unit. It is helped by solid external balances and low external debt.
• The IMF estimated that in 2008, despite an increase in non-hydrocarbons output of about 6% (a result of the government's infrastructure spending programme), real GDP growth in Algeria was only 3% (our estimate is 3.2%).
• Consumer price inflation was 4.5% year on year in January 2009.
• On February 22nd Sonatrach signed a gas sales agreement with Sorfert Algerie for a planned fertiliser complex at Arzew.