Country Report Algeria September 2009

Outlook for 2009-10

• 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.
• There is likely to be growing political tension in 2009-10 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 2009 and 2010.
• Robust domestic demand and major investment projects will sustain GDP growth at 3.4% in 2009. Growth is expected to rise to 4.5% in 2010 owing to higher oil and gas output.
• The government is likely to encourage a slight depreciation of the Algerian dinar against the US dollar and the euro during the remainder of 2009 and in 2010 as part of its policy to reduce the import bill and boost exports.
• In 2009-10 lower oil and gas prices will lead to a sharp contraction in the trade surplus, to an average of US$15bn from US$39bn in 2008. This will result in a concomitant narrowing of the current-account surplus.

Monthly review

• Tensions between migrant Chinese workers and locals have increased, and fighting broke out in the streets of Algiers in early August. The youth of Algiers is becoming increasingly frustrated at high levels of unemployment.
• An agreement to resume UN-sponsored talks on the future of Western Sahara has been reached between the Moroccan government and the Polisario Front during an informal two-day meeting in Austria.
• The supplementary budget published on July 26th has banned consumer lending and includes a number of measures aimed at reducing imports and restricting foreign investment. It has been hugely unpopular.
• The supplementary budget has provided assistance to boost tourism and social development. Minor changes have been made to the budget.
• The government has signed a Memorandum of Understanding with foreign investors to build a series of vehicle manufacturing plants. The aim of the initiative is to reduce car imports.
• Sonatrach's chief executive has said that he is optimistic about the outcome of the eighth oil and gas bidding round, but the response of foreign oil firms remains uncertain. Meanwhile, investments continue to flow into the sector.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48;60;22
NAICS Code: 517;52;313