São Paulo – Algeria is still showing good economic performance sustained by public investment. However, the reduction in production of oil this year should cause the country’s Gross Domestic Product (GDP) to grow 2.5%, less than the 5% growth forecasted for the non-oil sector. These are some of the conclusions of the International Monetary Fund (IMF) team that visited the country from October 13th to 25th. The institution disclosed a press statement on the matter on Thursday (27).
IMF economists state that the infrastructure investment the government has been making has helped Algeria face the economic crisis, as has the wage increase granted to civil servants. The fund states that the country has benefited from oil price hikes this year, despite having presented lower production.
Public spending in Algeria has been rising in recent years and is a threat to long-term stability. According to the study, the public sector deficit should reach 5% of GDP in 2011, against 2% in 2010. Inflation should end the year at 4%, although the price of fresh food should rise more, around 4.3%. To fund economists, inflation is under control and is a result of prudent economic policies adopted by the government.
The good moment lived by the local economy does not distance the country from challenges, like inflationary pressures that may arise in the short term and the need to control exchange rates. Apart from these, other problems may arise in 2012.
Unemployment is stable, at 10%, but should drop, according to the IMF. Unemployment among youths faces 21% of males and 19% of females. One of the solutions to this problem is diversification of the economy to help develop the private sector. Apart from generating jobs, private companies will maintain the country’s growth, not the oil sector, according to the IMF.
“A deterioration of the international economic environment could depress petroleum prices for some time and substantially worsen fiscal balances. Also, as the public investment program matures, the private sector must be prepared to take over as the engine of growth for non-oil activity,” says the IMF press statement.
*Translated by Mark Ament
