Country Report Algeria October 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 speculation that the president's brother is establishing a political party, 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 small 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 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$17.5bn from US$12.5bn in 2009. This will result in a concomitant widening of the current-account surplus.

Monthly review

• Local media have speculated that a rumoured reshuffle could involve the removal of ministers and abolition of ministries with the aim of further concentrating power in the hands of the president, Abdelaziz Bouteflika.
• Leaders of a grouping of government, worker and employer organisations have begun debating the minimum wage ahead of an October meeting, sparking wider debate on recent changes to the finance law.
• Businesses have continued to protest against recent measures introduced in the last supplementary budget that required the use of letters of credit for import payments and banned credit for consumer goods excluding houses.
• Orascom Telecom Algeria has been prevented from repatriating dividends to Egypt, purportedly owing to an outstanding tax debt, but more likely related to government efforts to stem the outflow of capital from the country.
• The ease of doing business has deteriorated in Algeria according to World Bank's, Doing Business 2010 rankings.
• Delays to the completion of the Medgaz pipeline have been reported and confirmed by industry sources, and gas export targets have been pushed back to 2014, according to the energy minister, Chakib Khelil.