São Paulo – Inflation under control, Gross Domestic Product (GDP) growth of around 2.5% in 2011, increased foreign exchange reserves and declining unemployment are some of the good results found by a delegation of the International Monetary Fund (IMF) in Algeria, according to a statement issued this Friday (27th).
The Fund’s mission underscored, however, that the country must work harder to diversify its revenues and reduce dependence on oil exports, as well as create conditions for jobs to be created in the private sector, and to include youths and women in the labour market.
The Fund estimates that inflation stood at 4% in 2011, and hydrocarbon export revenues grew by around 30%. The country’s foreign exchange reserves stood at US$ 178 billion as of August 2011, after having grown by US$ 16 billion since late 2010.
“In 2011, growth is estimated to have remained solid and higher oil prices are strengthening Algeria’s external balance and boosting fiscal revenues. The ripple effects of the Public Investment Program (PIP) are expected to maintain non-hydrocarbon growth at about 5%, and to bring overall GDP growth to about 2.5%,” the study claims.
According to the survey, macroeconomic conditions should remain stable in the short term, but in the medium term financial stability should become more dependent on oil price fluctuations. The country’s growth should be driven by the public investment and national hydrocarbon companies’ investment programs. Furthermore, the IMF warns that should the oil barrel price drop lower than US$ 100 for a prolonged period, the country will be forced to curb public investment and withstand high unemployment rates.
“Important challenges persist, including the need for diversification of the economy, improving the business climate, reducing unemployment, as well as curtailing medium-term vulnerabilities. With public investment expected to play a less dynamic role in the economy, the private sector will need to become a stronger engine for growth and employment creation.”
Though on a down trend, unemployment is still high. In 2010, the rate was lower than 10%. The situation is worse among women and youths. “To make a significant dent in unemployment, a more ambitious structural reform agenda should be implemented,” the report claims.
*Translated by Gabriel Pomerancblum
