Economic overview
Algeria’s natural resources—particularly oil—drive its economy, making up 30% of gross domestic product, more than 95% of export earnings and about 60% of budget revenues. The country supplies roughly a fifth of Europe’s natural gas imports. Petroleum revenues have helped Algeria maintain economic stability, compared to its regional neighbors. But oil and gas production is dropping, from 43.2 million tonnes in 2007 to around 32 million tonnes in 2011, according to the African Economic Outlook. That’s strengthening a call for diversifying Algeria’s state-dominated economy.
Algeria has not seen the political uprisings that ousted leaders or forced significant government reforms in nearby countries. But political and economic unrest is growing. In January, militants attacked a gas facility in the southern Algerian desert, killing more than three dozen foreign hostages. Widespread poverty and high unemployment have sparked discontent, particularly among Algeria’s youth. People under 30 make up more than 70 percent of Algeria’s population, and youth unemployment is about 21%, according to the International Monetary Fund. Overall, unemployment is at 10.2%. GDP was an estimated 2.6% in 2012, up slightly from 2011 but down from 3.3% in 2010.
Business travel industry insight
The January gas facility attack curbed business operations in Algeria and significantly slowed business travel to and from the country. The U.S. State Department and other foreign agencies continue to warn against travel to the country. Security is the top travel management priority, but other issues—such as a lack of credit card acceptance—also make business travel a challenge. Nonetheless, business travel is picking up again in Algeria, driven by the petroleum industry and the sectors that serve it.
Opportunities
- Oil will remain a long-term driver of the economy in Algeria, which ranks 16th in global oil reserves.
- The agricultural and services sectors recorded growth of 10% and 5.3%, respectively, in 2011, and sectors such as telecommunications, construction and pharmaceuticals are expanding.
- The government has introduced tax breaks and other measures to foster growth of small and medium-size businesses.
Challenges
- The country’s security situation hampers business travel and new business development.
- Algeria is over-reliant on oil, and in this state-dominated economy, government must help drive diversification.
- The World Bank ranks Algeria 156th among 185 economies for ease of starting a business. By comparison, the average regional ranking for the Middle East and North Africa is 108, and neighboring Morocco ranks 56.
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