Algeria: IMF Executive Board Concludes 2013 Article Iv Consultation With Algeria

press release

On January 23, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Algeria without a meeting.

Economic performance in 2013 has been satisfactory. Inflation, which reached 8.9 percent last year, has decelerated significantly in 2013 thanks to fiscal consolidation and prudent monetary policy. Real gross domestic product (GDP) growth is expected to slow to 2.7 percent in 2013 from 3.3 percent in 2012, reflecting a continued decline in hydrocarbon sector output and lower public spending, somewhat offset by the strong growth of private demand and investment by state-owned enterprises. However, Algeria's external position, though still very strong, has started to weaken. The current account surplus is expected to narrow to 1.1 percent of GDP in 2013, as robust domestic hydrocarbon consumption, together with declining prices, weighs on hydrocarbon exports and import growth remains sizeable. Risks are tilted to the downside: Algeria is vulnerable to a prolonged decline in oil prices, a worsening of the global environment, further pressure on the hydrocarbon rent, and an intensification of regional tensions. Outward spillovers are likely to be limited. Algeria faces a number of challenges. Despite stabilization in 2013, new inflationary pressures may arise following the recent surge in credit and a new increase in public sector wages. Fiscal and external vulnerabilities to developments in the hydrocarbon sector are worsening, as the domestic consumption drag on export volumes is compounding the longstanding risk related to lower oil prices. In addition, notwithstanding the ongoing consolidation, fiscal policy is not on a sustainable path. It is de facto pro-cyclical, and the non-hydrocarbon primary deficit is well above its long-term sustainable level, implying negative net public savings in the long run. Finally, shortcomings in competitiveness and productivity are weighing on economic growth, which remains below its potential and below the level required to significantly reduce unemployment, especially for youth and women. Although stable, the financial sector is underdeveloped, constraining access to financing, in particular for small- and medium-sized enterprises.

...

AllAfrica publishes around 400 reports a day from more than 100 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.