Algeria - Economy





Saharan oil and natural gas have been important export items since 1959, and they dominate Algeria's economy, accounting for over 95% of total export value, 60% of government revenue, and 30% of GDP. Algeria is the largest supplier of natural gas to the EU. During the late 1970s, as oil prices rose, real economic growth topped 20% annually, with the manufacturing sector averaging about 15%; during 1980–81, however, the rate dropped to 7–8% because of the weakening oil market, and a decline of 5% was registered in 1982, followed by an average annual growth rate of 4.5% during 1983–86. Because of the weak oil market, growth continued to fall, to 3.4% in 1989,1.1% in 1990, and negative growth in 1994 of -1.1%. Debt restructuring accomplished in 1994 and 1995 allowed increased imports and restored economic growth to an estimated 3% per year. The real growth rate in 1998 was 3.2%, and was forecast at6.8% for 2003 and 5.3% in 2004. These healthy growth rates in the early 21st century were driven by real export growth, based on expanding crude oil production, although government consumption played a role. As of 2003, Algeria had a large trade surplus, high foreign exchange reserves, and had reduced its foreign debt.

Although nearly 20% of Algerians make their living directly from the soil, agriculture produces only about 10–11% of Algeria's GDP every year, and meets only a small portion of the country's needs. The government targeted agricultural development as a priority in the late 1990s, but drought in 1997 dimmed agricultural prospects. However, good rains in 2001 produced a stronger performance for cereals in terms of real growth.

Before independence, the Algerian economy was almost completely dependent on the Europeans, who employed more than 90% of those working in industry and commerce, accounted for about 90% of gross business earnings, and provided some 90% of the country's private investment. The exodus of most Europeans in 1962 temporarily disrupted Algeria's economic life. The FLN governments established a Socialist economy by nationalizing the mining industry and creating state farms and state-owned industries on abandoned farms and on expropriated French landholdings. The nationalization with compensation of all foreign-owned companies was completed in 1974, although certain companies operating in partnership with Algerian state enterprises were allowed to continue. In the 1980s, decentralization was emphasized, with over 90 state corporations split into 300 specialized units. It was announced in 1987 that these enterprises would adopt their own annual plans, decide on the prices of their products, and invest their profits freely. In 1990 the money and credit law opened the way for substantial international participation in Algeria's economy. The 1993 investment code opened up Algeria to foreign investment, and investment promotion agencies were created in 1995 in order to stimulate the economy. Since then, Algeria has taken steps to liberalize foreign trade, the price structure, and foreign exchange system, and to reevaluate the public sector while encouraging the private sector and competition.

The dramatic decline in oil prices in 1985–86 affected Algeria at a time when it also faced a heavy foreign debt burden. The Algerian government thus attempted to diversify the economy and privatize business. However, no meaningful progress on privatization was expected for 2003–04. In the late 1990s and into the 2000s, challenges to the Algerian economy included terrorism, inefficient agricultural methods, and an unemployment rate of 34% in 2001 that extended into the ranks of professionals, engineers, and highly trained workers.

User Contributions:

Nkosi
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Nov 21, 2008 @ 5:17 pm
Thank you for giving me this information because I needed it for my geography project on Algeria
LW
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Dec 1, 2009 @ 7:19 pm
TY for this Article, also for my Geo report on Algeria.

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