Algeria's economic promise: will it be enough?

Author:Smith, Pamela Ann
Position:Business: ALGERIA

WHILE THERE IS LITTLE DOUBT THAT ALGERIA'S population of 36 million faces many of the same problems as in Egypt, the North African country has far greater resources of oil and gas, which could be used to ameliorate the escalating cost of living and to tackle the extensive unemployment and underemployment, particularly among its youth. But, as elsewhere in the Arab world, much will also depend on the willingness of the government to allow peaceful protests, to curb widespread corruption and to reform the political system, economy and society.

After a dismal performance in 2009, Algeria's revenues from its hydrocarbon exports last year rose by almost a third, from $43 billion to just under $56 billion. This year they are expected to be even higher as a result of the rise in global oil prices and a recovery in international demand for gas. Algeria's new Medgaz pipeline under the Mediterranean to Spain is due to begin full operations this spring and a new trans-Saharan gas link to Nigeria is also being developed.

The sector, which accounts for more than 96% of the country's export income, should also flourish this year thanks to a programme of intensive investment in new projects which has followed a crackdown on corruption in the state-owned oil and gas company, Sonatrach, and the appointment of a new energy minister, Youcef Yousfi. Some $60 billion is to be invested in new oil and gas facilities between now and the end of 2015. Of this, according to a statement issued by Yousfi in January, 57% will be focused on new exploration and production. This year alone, investment in new exploration projects is due to rise by 40%, he added.

The strong performance of hydrocarbons helped to push up GDP growth by 4.1% in 2010 to $153 billion. This is expected to rise to $164 billion by the end of next year, according to expert forecasts, even though some slowing in economic growth is predicted due to the social unrest. However, industrial growth should remain strong, increasing by an estimated 4.8% this year, 4.7% in 2011 and an impressive 5.8% in 2010. This could offset sharp falls in the services sector and a decline in agricultural output over the next two to three years.

The country's international financial reserves are another strong point. They amounted to no less than $158 billion in 2010, despite sharp falls in the country's current account balance over the past few years, thanks in part to earnings on Algeria's huge foreign assets and by the end...

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