Country Report Algeria November 2009

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 growing political tension in 2010-11 with indications of disunity within the presidential alliance and growing discontent with social conditions amid continued attacks by militants.
• Fiscal policy will remain strongly expansionary. Reduced oil and gas revenue, owing to lower hydrocarbons prices, will lead to the central government budget posting deficits in both 2010 and 2011.
• Continued robust government spending, investment projects and a recovering global economy will increase GDP growth to 4.6% in 2010, but it is expected to fall to 4.1% 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 an expansion of the trade surplus, to an average of US$8.8bn from US$4.9bn in 2009. This will result in a concomitant improvement in the current-account.

Monthly review

• Rioting has erupted across the country as people, particularly the young unemployed, have taken to the streets to protest about social conditions.
• A militant group, al-Qaida in the Islamic Maghreb, has carried out an attack on a police convoy escorting foreign contractors.
• The 2010 draft budget has been approved by the cabinet and includes a 13% increase in budgeted government spending and a number of new taxes aimed at lowering imports, as well as the extension of some exemptions.
• The IMF has issued a statement giving a positive assessment of macroeconomic conditions, but with reservations about the impact of a number of recent measures introduced in the 2009 supplementary budget.
• The trade surplus has continued to narrow as the value of exports has fallen faster than the value of imports, despite falling commodity costs.
• Senior Sonatrach and energy ministry officials have made announcements indicating that gas projects continue to suffer delays.
• Plans for infrastructure development have progressed with bidders being shortlisted for two refinery projects and Algerie Telecom stating that it plans to spend US$6bn on upgrades to its mobile and fixed-line operations by 2014.

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