The hydrocarbons sector is the backbone of the Algerian economy, accounting for roughly 60% of its budget revenues and over 95% of export earnings. With its seventh-largest natural gas reserve rank in the world and the Arab second-largest gas exporter one, Algeria has fairly consolidated its GDP, which passed from $83,9 billion in 2004 to $135 billion in 2007. Per capita skyrocketed in 2007 reaching $3968, non-oil GDP growth hovered 6%.
After the implementation of a rigorous macroeconomic stabilization program and the rescheduling of its Paris Club debt in the1990s, Algeria has lunched a complementary macroeconomic program which contributed in reducing inflation from averages of 30% in the mid-90s to 4,6% in 2007 and the budget deficit as well. The economy has grown to 4.5% in 2007 and the foreign debt fall to $4.8 billion after the 2006 arrangements with Algeria’s creditors of Paris Club for paying by anticipation of nearly $13 billion debt.
Algeria has invested heavily to improve the business environment with the efforts aiming to consolidating the result of the 2001-2004 public spending plan through the $55 bn Complementary Growth Support Plan lunched by President Abdelaziz Bouteflika for developing spending between 2005 and 2009, a plan aimed at improving living conditions, upgrading the country’s infrastructure, improving the business environment and rebalancing the regional development. The major projects to be carried in the same period are the construction of 1 million housing units, a 1260km east-west highway and the capital underground metro, plus the capital new airport got into service since last July 2006. Almost a similar Development Program for the South and the Hauts Plateaux region was launched.
The Algerian economy is not sufficiently diversified and Algeria is still dependent on the crude oil sector consolidated by the hydrocarbons low of April 2005, modified in July 2006. However, it can take advantage of its geographical position in the center of the Maghreb and North Africa, the potential of its population, its skilled and competitive labor force, a dense industrial fabric (steel industry, petrochemicals, electronics..) and a new policy favorable to business.
The Government pledges to continue its efforts to diversify the economy by attracting foreign investment outside the energy sector and the legislation for this aim provides all the measures to encourage investment without distinction between domestic and foreign capitals.
Since January 2002, a new customs tariff has been in force. It comprises four customs rates: 0, 5, 15 and 30%, depending on the degree to which the imported products have been transformed. The rate of 5% is applicable for raw materials and generally for capital equipment, the average rate (15%) for semi-finished and intermediate products, and the highest rate (30%) for final end-user consumer goods. These rate levels mean that Algeria is more open country in the Mediterranean basin even before the phasing out of tariffs planned by the free trade area comes into force. However, an additional temporary duty (DAP) is applied to certain goods so as to protect locally produced products. From 60% at the start (2001), it is a digressive duty (12% /annum) in time until its entire disappearance.
Algeria is undertaking a public finance reform that started with the currency and credit Law in the beginning of the 90s. The suspension of the State bank "Credit Popular d’Algérie" privatization process to assess the international financial crises implications will resume as earlier as possible.
Many other reforms are currently underway as Algeria is gearing up to reap the fruit of the Association Agreement with the European Union (came into effect since September, 1st,2005) and the coming country’s accession to the World Trade Organization (WTO).