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Contact at AFI team is Jakkie Cilliers
This entry was last updated on 10 August 2022 using IFs v7.63.

In this entry, we first describe the Current Path forecast for Algeria as it is expected to unfold to 2043, the end of the third ten-year implementation plan of the African Union’s Agenda 2063 long-term vision for Africa.

The Current Path forecast is divided into summaries on demographics, economics, poverty, health/WaSH and climate change/energy. A second section then presents a single positive scenario for potential improvements in stability, demographics, health/WaSH, agriculture, education, manufacturing/transfers, leapfrogging, free trade, financial flows, infrastructure, governance and the impact of various scenarios on carbon emissions. With the individual impact of these sectors and dimensions having been considered, a final section presents the impact of the Combined Agenda 2063 scenario.

We generally review the impact of each scenario and the Combined Agenda 2063 scenario on gross domestic product per person and extreme poverty except for Health/WaSH that uses life expectancy and infant mortality.

The information is presented graphically and supported by brief interpretive text.

All US$ numbers are in 2017 values.

Summary

  • Current Path forecast
    • Algeria is a member of the Arab Maghreb Union and is classified as a lower middle-income country. Jump to forecast - Current path
    • Algeria’s population was estimated at 43 million in 2019, and by 2043 the country will have a population of about 56.4 million, about a 30% increase over the next 24 years. Jump to Demographics - Current path
    • Algeria’s economy is heavily dependent on the hydrocarbon industry although the service sector dominates in its contribution to GDP. In 2019, the economy was estimated at US$266.5 billion, and by 2043 is projected to grow to US$465.7 billion. Jump to Economics - Current path
    • Algeria has achieved a significant decrease in income poverty reduction in the last two decades, largely through government provisions of healthcare, education, subsidies and transfers; however, they have led to other social and regional inequalities due to inefficient and poor targeting of subsidy items. Jump to Poverty - Current path
    • Carbon emissions in Algeria are largely from the energy sector but come off a very low base. In 2019, according to IFs, Algeria produced 45 million tons of carbon (not CO2), and by 2043 will be producing 69 million tons of carbon, an increase of 53%.  Jump to Carbon emissions - Current path
  • Sectoral Scenarios
    • The Stability scenario creates a more stable Algeria and the governance security index rises to 0.89 in 2043. Jump to Stability scenario
    • In the Demographic scenario, Algeria’s demographic dividend peaks at 2.16 working-age persons per dependant by 2039, a slightly higher peak than it achieved in 2010 at 2.06. Jump to Demographic scenario
    • The Health/WaSH scenario improves life expectancy to 81 years by 2043, 8.9 years more than the projected continental average of 72.1 years. Jump to Health/WaSH scenario
    • The Agriculture scenario increases crop yields to about 5 tons per hectare compared to 3.7 tons in the Current Path forecast. However, this increase still does not get to the 2019 crop yield average for lower middle-income countries on the continent. Jump to Agriculture scenario
    • In the Education scenario, the mean years of education improve from 9.3 years in the Current Path forecast to 9.4 years in 2043. Jump to Education scenario
    • The Manufacturing/Transfers scenario reduces poverty in the medium-term. By 2033, only about 6 million Algerians will be living in extreme poverty (at the US$3.20 threshold), about 1.86 million fewer people relative to the Current Path forecast with roughly 7.85 million people in that year. Jump to Manufacturing scenario
    • In the Leapfrogging scenario, by 2033, fixed broadband subscriptions per 100 people are projected to be 50, compared to 25.3 in the Current Path forecast. This rate, however, remains stagnant thereafter. Jump to Leapfrogging scenario
    • In the Free Trade scenario, the trade balance is above the Current Path forecast until around 2033, although Algeria will already be recording a negative trade balance. Thereafter, the country maintains its status as a net importer. Jump to Free trade scenario
    • In the Financial Flows scenario, by 2043, foreign direct investment inflows are projected to account for about 2.14% compared to about 1.7% in the Current Path forecast. Jump to Financial Flows scenario
    • The Infrastructure scenario increases the rural population within a 2 km access to an all-weather road to 93.8% of the population compared to 91.4% in the Current Path forecast in 2043. Jump to Infrastructure scenario
    • The Governance scenario increases the government effectiveness index to 2.28 compared to 2.14 in the Current Path forecast, a 6.5% improvement in 2043. Jump to Governance scenario
    • The Free Trade, Governance, and Manufacturing/Transfers scenarios will be the leading causes of increased carbon emissions in Algeria throughout the forecast horizon. Jump to Carbon emissions scenario
  • Combined Agenda 2063 scenario

All charts for Algeria

Chart 1: Political map of Algeria
Chart
Algeria: Current Path forecast

Algeria: Current Path forecast

This page provides an overview of the key characteristics of Algeria along its likely (or Current Path) development trajectory. The Current Path forecast from the International Futures forecasting (IFs) platform is a dynamic scenario that imitates the continuation of current policies and environmental conditions. The Current Path is therefore in congruence with historical patterns and produces a series of dynamic forecasts endogenised in relationships across crucial global systems. We use 2019 as a standard reference year and the forecasts generally extend to 2043 to coincide with the end of the third ten-year implementation plan of the African Union’s Agenda 2063 long-term development vision.

The People’s Democratic Republic of Algeria is the largest country in Africa and until early 2020 was classified as an upper middle-income country before it was downgraded to lower middle-income country status. Evident from the charts and discussions that follow, Algeria generally has better socio-economic characteristics when compared to its lower middle-income peers. The country is bordered by Tunisia to the north-east, Libya to the east, Morocco to the west and shares borders with Niger, Mali, Mauritania and Western Sahara in the south. Much of the interior is arid and the vast majority of people are concentrated in the fertile coastal plain along its thousand-kilometre coast along the Mediterranean Sea. [1World Population Review, Algeria population , 2019] Algeria is a member of the Arab Maghreb Union, but the Union has long been stagnant largely due to differences with Morocco over the status of Western Sahara.

Algeria suffered a brutal civil conflict from December 1991 to 2002 and has since had an increasingly lethargic political system, a poorly performing economy characterised by overregulation, cronyism, corruption, lack of innovation and dependence on a rapidly declining hydrocarbon industry. Like many other countries in North Africa, Algerians evidenced widespread and increased disenchantment with a political system that excluded many from participating in meaningful economic activity. [2IK Harb, Challenges facing Algeria’s future, July 2017, المركز العربي بواشنطن (Arab Center Washington DC)]

Algeria has inevitably suffered the destabilising impact of the insecurity in Libya which has caused an influx of weapons and terrorism in a region already characterised by poor border control and rampant organized crime and smuggling. [3See, for example, R Dhaouadi, Cross-border smuggling: What drives illicit trade in North Africa?, ENACT Project, 5 July 2019]

Discontent peaked when in February 2019, President Abdelaziz Bouteflika announced his intention to stand for a fifth presidential term in the April 2019 elections. [4Bouteflika had, in 2016, engineered a constitutional amendment that limits presidential terms to two, but since it was not retroactive, it allowed him to stand for a fifth term.] The announcement triggered weekly protests of millions of Algerians in what became known as the Hirak movement. The movements bridged religious, ethnic and tribal divisions in an unprecedented display of unity. Their demands called for the renewal of the social contract, the dissolution of the ruling elite and their control of the economy, the end of the dominant role of the military in political and economic matters, greater democracy, rule of law, individual freedom and equal opportunity. [5A Boubeker, Demonstration effects: How the Hirak protest movement is reshaping Algerian politics, February 2020]

Eventually the military forced Bouteflika’s resignation, which was followed by elections on 12 December 2019, won by former Prime Minister Abdelmadjid Tebbounee with the lowest voter turnout in the country’s history. [6The Guardian, Mass boycott and police clashes as Algeria holds disputed elections, The Guardian, December 2019]

Sustained anti-government protests were only quashed in May 2021.

 

 

Chart 1: Political map of Algeria
Chart
Demographics: Current Path

Demographics: Current Path

Algeria’s population was estimated at 43 million in 2019, and by 2043 Algeria will have a population of about 56.2 million, about a 30% increase over the next 24 years.

Algeria’s population growth is significantly below the average of the Middle East, North Africa and sub-Saharan Africa. The country’s population growth rate has been falling since the 1960s due to declining fertility rates as a result of improvements in levels of female education, use of modern contraceptives and the overall impact of urbanisation.

Algeria’s total fertility rate (TFR) ranks 11th on the continent. However, TFR increased to 2.72 in 2010 and to 2.96 by 2015. This increase in births is often observed in periods of social and political instability, particularly in the Middle East and North Africa region. [7I Pool, 2012, Demographic Turbulence in the Arab World: Implications for Development Policy, Journal of Peacebuilding & Development, 7(1), pp.33–50]

TFR is projected to reach the replacement level of 2.1 births by 2042 and then drop below two children per woman after 2045. This will signify Algeria’s demographic profile. Its population will be older and this will likely present the country with a number of challenges, including increased health spending on non-communicable diseases (NCDs), which are inherently more expensive to diagnose and treat, a shrinking economy and possibly declining average incomes per capita if it is not able to improve the productive structures of its economy through better use of technology and more investment.

However, Algeria has a favourable working-age population with people aged 15- to 64 years old constituting 63% of the total population, although unemployment remains high among the youth and women. It is therefore critical that the government focuses on providing economic opportunities for this large working-age population.

 

Like most North African countries, Algeria is quite urbanised. In 2019, 73% of the population resided in urban areas, nearly 24 percentage points more than the average of lower middle-income countries on the continent at 49%. By 2043 Algeria’s rate of urbanisation is projected to increase to 81.4% while the rural population will have dropped to 18.6% from 26.8% in 2019.

However, with rapid urbanisation have come land and housing issues with the sprawl of informal settlements in Algeria’s main cities and towns. Good urban planning is thus key for better service delivery and urban poverty reduction. In addition, adequate and appropriate urban planning is critical for Algeria, especially for cities and towns along the Mediterranean coast, in terms of the impacts of climate change, such as flooding, to human life. [8F Sahnoune, M Belhamel, M Zelmat, R Kerbachi, 2013, Climate Change in Algeria: Vulnerability and Strategy of Mitigation and Adaptation, Energy Procedia, 36, pp. 1286-1294]

In the 2014 census, 63% of the Algerian population lived in the north of the country on 4% of the land territory, 28% in the highlands (9% of territory), while the south (constituting 87% of territory) only had 9% of the country’s total population. The uneven distribution of the population and of urban and economic activities is a result of harsh desert conditions and economic and historical factors. However, rapid urbanisation is largely a result of development and economic changes in the country which have concentrated the population in the large northern cities. [9Republique Algerienne Democratique et Populaire, National Report on Housing for the Conference on Housing Habitat III, July 2014] As a result, 90% of Algerians live along the Mediterranean coast, particularly in the Algiers metropole. [10World Population Review, Algeria population 2019]

Chart 4: Population density map for 2019
Chart
Economics: Current Path

Economics: Current Path

Algeria’s economy is heavily dependent on the hydrocarbon industry, although the service sector dominates in its contribution to GDP. Oil and gas account for nearly 30% of GDP, 65% of budget revenues, more than 85% of exports and an estimated 95% of Algeria’s foreign currency receipts. [11E Stuart, Algeria’s new hydrocarbon law comes into force amid output slump, January 2020, S&P Global Platts ; H Saleh, Algeria faces economic crunch as oil and gas revenues fall short, March 2019, Financial Times]

Due to dependence on hydrocarbons, Algeria recorded multiple bouts of negative growth rates (from 1986 to 1994) linked to declining oil prices and periods of domestic instability. Since 2014, declining oil prices, political instability, unemployment and widening fiscal and external deficits have undermined the Algerian economy. [12World Bank, How is Algeria reacting to low oil prices?, July 2016]

The economic challenges in Algeria are accentuated by its closed and state-controlled economy characterised by lack of competition, high barriers to entry in the many productive and labour-intensive sectors, weak legal and judicial system, cronyism, social exclusion, high public employment and universal consumer subsidies that take away resources from effective and diversified sustained growth. [13World Economic Forum, How Algeria can boost its economy, April 2019]

Algeria recorded an average annual GDP growth of only 2.8% between 1980 and 2010. IFs projects that Algeria will achieve an annual average growth of about 2.7% between 2021 and 2043, roughly 2.3 percentage points below the average of lower middle-income countries in Africa.

In 2019, the size of Algeria’s economy was estimated at US$266.5 billion. By 2043, the economy is projected to grow to US$465.7 billion, a nearly 75% improvement from 2019.

 

Although many of the charts in the sectoral scenarios also include GDP per capita, this overview is an essential point of departure for interpreting the general economic outlook of Algeria.

After years of steady growth, GDP per capita started to decline in 1986 and only regained its 1985 level in 2001.

GDP per capita growth again started to decline from 2016 and in the Current Path forecast will only return to that level at around 2032, given the impact of the COVID-19 pandemic. GDP per capita is expected to improve from US$14 802 in 2019 to US$16 426 by 2043. This will be 44% more than the average for lower middle-income countries in Africa at US$9 142.

In 2019, Algeria had the second highest GDP per capita among North African countries after Libya and did slightly better than Egypt. It also had the highest GDP per capita among Africa’s 23 lower middle-income countries.

In 2019, the informal economy constituted about 18.4% of Algeria’s economy, and by 2043 it is projected to modestly decline to 16.3%. The informal economy acts as a safety valve to reduce unemployment and to provide basic livelihood for many Algerians. Between 2000 and 2017, it was estimated that the informal economy reduced unemployment from 30% to 12%. [14World Economic Forum, How Algeria can boost its economy, April 2019]

Additionally, there is evidence of significant volumes of informal trade with Tunisia and Mali facilitated by the topography consisting of mountains and deserts that offer opportunities for illicit trade. Petrol is ten times cheaper in Algeria than in Tunisia and informal traders benefit from this disparity at the expense of tax revenue. The tax and subsidy differentials are the main drivers of the large, unregulated and informal trade between Algeria and its neighbours. [15A Lotfi, N Benjamin, S Bensassi and G Raballand, 2013, Estimating informal trade across Tunisia's land borders (English). Policy Research working paper; no. WPS 6731, Washington, DC: World Bank Group]

In the long-run, a large informal sector is detrimental to the overall functioning of the economy given its limited contribution to taxes and low levels of productivity compared to the formal sector. It is therefore important for Algeria to reduce the size of its informal economy with the least friction possible by reducing the barriers to entry into the formal economy, which introduce competition and lower the associated regulatory burden. Critical to crowding in the informal sector is the decriminalization of aspects of the informal economy and making a distinction between illicit and informal activities. [16A Lotfi, N Benjamin, S Bensassi and G Raballand, 2013, Estimating informal trade across Tunisia's land borders (English). Policy Research working paper no. WPS 6731, Washington, DC: World Bank Group]

The IFs platform uses data from the Global Trade and Analysis Project (GTAP) to classify economic activity into six sectors: agriculture, energy, materials (including mining), manufactures, services and information and communications technology (ICT). Most other sources use a threefold distinction between only agriculture, industry and services with the result that data may differ.

According to IFs, manufacturing comprised the largest sector at just over 33% in 2019 (US$88 billion) but by 2043 will have slightly declined to 28.8% of GDP (US$134 billion). It is followed by the service sector at nearly 32% of GDP (US$85 billion), but by 2043 the size of the service sector is forecast to modestly decline to about 30.7% of GDP (US$143 billion).

Energy is estimated to contribute 15.6% of GDP, and by 2043 it is projected to increase its share to GDP by approximately 7.9 percentage points to 23.5% of GDP.
ICT contributes less than 4%. The agriculture sector contributes about 12.3% of GDP but it is projected to decline in the forecast horizon to about 9.4% by 2043 as a result of the structural transformation of the economy.

The data on agricultural production and demand in the IFs forecasting platform initialises from data provided on food balances by the Food and Agriculture Organization (FAO). IFs contains data on numerous types of agriculture but aggregates its forecast into crops, meat and fish, presented in million metric tons. Chart 9 shows agricultural production and demand as a total of all three categories.

As a result of generally poor yields, agricultural demand has outstripped supply since the 1970s making Algeria heavily dependent on food imports.

Agricultural crop production in 2019 stood at 28.6 million metric tons (mmt) compared to demand at 49.4 mmt. By 2043 this gap will have widened by approximately 43% with production at only 37.9 mmt compared to demand at 66.8 mmt. Chart 9 shows the excess demand for crops that will likely be met through imports.

According to IFs, in 2019, Algeria imported foodstuffs worth about US$12 billion. The heavy import dependence exposes the country to disruptions in international supply chains, price shocks and other related risks. This has become particularly evident with the COVID-19 crises amidst depletion of the country’s foreign reserves.

Algeria faces the double risk of commodity vulnerability: one from food imports and another from hydrocarbons. A slump in oil prices from over US$100 a barrel in 2014 to roughly US$20 in 2020 has left Algeria struggling to fund its approximately US$75 billion annual import bill of which food comprises approximately 17%.

Poverty: Current Path

Poverty: Current Path

There are numerous methodologies and approaches to defining poverty. We measure income poverty and use GDP per capita as a proxy. In 2015, the World Bank adopted the measure of US$1.90 per person a day (in 2011 international prices), also used to measure progress towards the achievement of Sustainable Development Goal 1 of eradicating extreme poverty. To account for extreme poverty in richer countries occurring at slightly higher levels of income than in poor countries, the World Bank introduced three additional poverty lines in 2017:

  • US$3.20 for lower middle-income countries 
  • US$5.50 for upper middle-income countries
  • US$22.70 for high-income countries.

Algeria has achieved a significant income poverty reduction in the last two decades. In terms of human development, Algeria is among the 20 countries in Africa to have achieved the most substantial decrease in its Human Development Index between 1990 and 2015. 

Algeria has achieved the headline goal of reducing extreme poverty at the US$1.90 per person per day threshold. However, at the US$3.20 level for lower middle-income countries, Algeria had 15% of its population living in extreme poverty in 2019, equivalent to about 6.5 million people. By 2043 Algeria’s extreme poverty level will have declined, although approximately 5.7% of the population (about 3.3 million people) will still be in extreme poverty. In this case, Algeria performs much better than the average of lower middle-income countries in Africa which will then be at roughly 38% of the population.

Algeria generally enjoys inclusive, albeit low quality, social services (universal education and healthcare, subsidised food, housing and public transportation). These policies have constrained inequality, although subnational and regional differences remain significant. [17United Nations Economic Commission for Africa, Country Profile-Algeria, 2016]

Though Algeria’s subsidies and transfers have enabled poverty reduction, they have led to other social and regional inequalities due to inefficient and poor targeting of subsidy items. [18J Andrew, The need for subsidy reform in Algeria, August 2016] These disparities are manifested through significant inequalities in consumption rates with a gap of nearly 28% between the rich and the poor. [19World Bank, Poverty has fallen in the Maghreb but inequality persists, October 2016] The benefits are also not divided fairly among regions. For example, there is twice as much poverty in provinces in the Sahara and three times the national average among people living in the steppe ecological region. [20World Bank, Poverty has fallen in the Maghreb but inequality persists, October 2016] The coastal regions and the north of the country are the hubs of economic activity and experience significantly lower rates of poverty than the arid south. [21United Nations Economic Commission for Africa, Country Profile-Algeria, 2016]

Carbon Emissions/Energy: Current Path

Carbon Emissions/Energy: Current Path

The IFs platform forecasts six types of energy, namely oil, gas, coal, hydro, nuclear and other renewables. To allow comparisons between different types of energy, the data is converted into billion barrels of oil equivalent. The energy contained in a barrel of oil is approximately 5.8 million British thermal units (MBTUs) or 1 700 kilowatt-hours (kWh) of energy.

Algeria is largely dependent on oil and gas, which constituted approximately 38.1% and 61.7% of total energy production in 2019, respectively. This trend is expected to continue over the next 24 years.

The government of Algeria plans to introduce renewable energy into the local power market to save more natural gas for export. In May 2020, the government announced 4 000-megawatt solar projects, set to cost about €3 billion, intended to provide solar energy for both domestic demand and export. [22Reuters, Algeria plans $3bln solar power projects for home demand and exports, May 2020]

The Renewable Energy and Energy Efficiency Program adopted in 2011 aims to produce up to 40% of domestic power needs from renewable energy sources by 2030, mostly from solar power, with 3% coming from wind power. It has since set a new target goal for approximately 18.5 gigawatts from renewable sources (13.6 gigawatts of solar PV, and 5 gigawatts of onshore wind) by 2030. [23CDER, Algerian Portal of Renewable Energy]

Despite the plans for an energy shift, Algeria has been slow in implementing its renewable energy programme because of the strong reliance on fossil fuels and subsidies for energy products. [24T Hinane El Kadi, 15 June 2020, The lack of ‘will’ by governments to engage in restructuring efforts is explained by Karl (1997) as situations of ‘arrested institutional adjustment’, whereby strong rentier constituencies block reforms as they hold vested interests in the existing order. In an influential book, Winners and Losers: How Sectors Shape the Developmental Prospects of States, Shafer (1994) argues that dominant sectors characterised by capital intensiveness, such as minerals and oil, create powerful lobbies that pressure state incumbents to maintain the status quo as a prerequisite for their political survival despite long term welfare loss.] Regulatory and administrative challenges impede the participation of international investors to enable expansion and greater uptake in this sector. [25EIA, Algeria]

However, there have been efforts to reform subsidies. By 2018, the government of Algeria had raised diesel and petrol prices by 48% and 54%, respectively, since the last price adjustment in 2016. Reforms stalled the reversal of the consolidated fiscal policy in the second half of 2017. [26S Haddoum, H Bennour, T Ahmed Zaïd, 2018, Algerian Energy Policy: Perspectives, Barriers and Missed Opportunities, Global Challenges, 2(8), 1700134] It was expected that subsidies would again be lowered at the beginning of 2019, but instead the draft budget increased subsidy spending by 7% to account for 21% of the total budget. [27HO Ahmed, Algeria shelves subsidy reforms before presidential elections, November 2018, Reuters] The government of Algeria further increased fuel prices in June 2020 following the sharp drop in oil prices associated with the impact of the COVID-19 pandemic on global growth.

The government plans to cut petrol (and food) subsidies to curb its fiscal deficits in the 2022 budget. [28Reuters, Algeria aims for subsidy reform in budget plan, October 2021]

 

Carbon is released in many ways, but the three most important contributors to greenhouse gases are carbon dioxide (CO2), carbon monoxide (CO) and methane (CH4). Since each has a different molecular weight, IFs uses carbon. Many other sites and calculations use CO2 equivalent.

Annual CO2 emissions have been increasing in Algeria due to increased economic activity. Emissions largely come from the energy sector (fossil fuel industry). In 2019, the Global Carbon Project reported that Algeria emitted 171.7 million tons. However, this only constitutes 0.47% of global CO2 emissions. [29P Friedlingstein et al, 2020, Global Carbon Budget 2020, Earth System Science Data, 12, 3269–3340]

In 2019, according to IFs, Algeria produced 45 million tons of carbon (not CO2), and by 2043 it will be producing 69 million tons of carbon, an increase of 53%. However, it must be noted that Algeria is coming off a very low base and its carbon emissions. Developed and emerging economies must help Algeria and the many other developing countries to deal with the impact of climate change which will disproportionately affect the country.

Stability scenario

Stability scenario

The Stability scenario represents reasonable but ambitious reductions in risk of regime instability and lower levels of internal conflict. Stability is generally a prerequisite for other aspects of development and this would encourage inflows of foreign direct investment (FDI) and improve business confidence. Better governance through the accountability that follows substantive democracy is modelled separately.

The intervention is explained in here in the thematic part of the website.

Events from the civil war, the first wave of the Arab Spring to the Hirak movement are all pointers that Algeria needs to continue with reforms in its political and security systems. Some of the issues raised by the Hirak movement, for example, include an end of the dominant role of the military in political and economic matters, more democracy, rule of law, individual freedom and equal opportunities. [30B Amel, Demonstration effects: How the Hirak protest movement is reshaping Algerian politics, February 2020] The country also faces threats emanating from regional instability in Libya, Mali and even Tunisia as a result of terrorism.

Stability would not only promote peace and political consensus in Algeria but also encourage greater investment in terms of FDI and overall development.

Because of its high levels of military spending, Algeria scores higher on the governance security index than the average for lower middle-income countries in Africa. The Stability scenario increases the index to 0.88, a nearly 9% improvement compared to 0.80 in the Current Path forecast in 2033. The governance security index rises to 0.89 in 2043 in the Stability scenario compared to 0.81 in the Current Path forecast by then. In fact, Algeria’s security index is above the projected average of lower middle-income countries in Africa at 0.74 and 0.76 in 2033 and 2043, respectively.

By 2033 Algeria’s average GDP per capita would be US$273 higher in the Stability scenario compared to the Current Path forecast for that year. In 2043, the difference would increase to US$709. Hence, by 2043 Algeria would record a GDP per capita of US$17 135, a 4.3% increase above the Current Path forecast at US$16 426.

Algeria has attained the sustainable development goal (SDG) of eliminating extreme poverty at the US$1.90 per person per day threshold.

However, when using the lower middle-income extreme poverty threshold of US$3.20, 6.5 million Algerians (15% of the population) were considered to be extremely poor in 2019. The number reduces to approximately 2.7 million (4.7%) by 2043 in the Stability scenario compared to 3.3 million (5.7%) in the Current Path forecast for that year, a difference of 590 000 fewer people in extreme poverty.

This is a stark difference from the 38.3% rate of extreme poverty for the average of lower middle-income countries in Africa in 2043.

Demographic scenario

Demographic scenario

This section presents the impact of a Demographic scenario that aims to hasten and increase the demographic dividend through reasonable but ambitious reductions in the communicable-disease burden for children under five, the maternal mortality ratio and increased access to modern contraception.

The intervention is explained in here in the thematic part of the website.

Demographers typically differentiate between a first, second and even a third demographic dividend. We focus here on the first dividend, namely the contribution of the size and quality of the labour force to incomes. It refers to a window of opportunity that opens when the ratio of the working-age population (between 15 and 64 years of age) to dependants (children and the elderly) reaches 1.7.

Algeria experienced a peak demographic dividend in 2009 when the ratio of working-age persons to dependants exceeded a ratio of 2:1. Thereafter, the ratio of working-age persons to dependants deteriorated but is expected to improve from 2023 to peak at 2:1 in 2039 in the Current Path forecast. In the Demographic scenario, Algeria achieves a higher peak (at almost 2.2:1 in 2039) and also dwells longer in the positive demographic dividend window of opportunity that opens when the ratio of working-age persons to dependants is 1.7:1 and above. This means that for every 216 working-age persons in 2039 there will be 100 dependants, compared to the Current Path’s 196 for every 100 dependants by then.

In 2039, the ratio of working-age persons to dependants in lower middle-income countries in Africa will only be 1.5:1, and these countries will still be several years away from their peak, reflecting their generally much more youthful populations.

The infant mortality rate is the number of infant deaths per 1000 live births and is an important marker of the overall quality of the health system in a country.

Algeria has already met the 2030 SDG target to reduce infant mortality to 25 deaths per 1000 live births. Regardless, the Demographic scenario reduces infant mortality to 16.7 per 1000 live births compared to 19 in the Current Path forecast by 2033. By 2043 the infant mortality rate is 14.8, compared to 16.9 in the Current Path forecast.

This is a much more impressive outcome than the average of lower middle-income countries in Africa which in the Current Path forecast still do not achieve the infant mortality SDG target even by 2043, at which point the average would be at 29.7 deaths per 1000 live births.

The Demographic scenario’s impact on per capita income is modest at approximately US$152 more than the Current Path forecast of US$15 097 in 2033. By 2043 the difference more than doubles so that Algerians have about US$327 more in income than the Current Path forecast of US$16 426, a nearly 2% improvement over the Current Path forecast in that year.

Moreover, this would be a 44% difference from the projected average of lower middle-income countries in Africa at US$9 142 by 2043.

At the US$3.20 extreme poverty level, the Demographic scenario has little impact on poverty in Algeria. Poverty reduces from 15% in the Current Path forecast to 14.4% in 2033 and from 5.7% to 5% in 2043, respectively.

Generally, Algeria already has impressive basic human development indicators and human capital and boasts progressive social policies and programmes. The country’s development challenges have less to do with its population and more to do with the economic structure that is state-controlled and stifles opportunities for a large portion of its people.

Health/WaSH scenario

Health/WaSH scenario

This section presents reasonable but ambitious improvements in the Health/WaSH scenario, which include reductions in the mortality rate associated with both communicable diseases (e.g. AIDS, diarrhoea, malaria and respiratory infections) and non-communicable diseases (NCDs) (e.g. diabetes), as well as improvements in access to safe water and better sanitation. The acronym WaSH stands for water, sanitation and hygiene.

The intervention is explained in here in the thematic part of the website.

Free healthcare was introduced in Algeria in 1974, and in 1984, reforms shifted the health system from a curative to a preventive one more suited to its then youthful population with high levels of communicable diseases.

As a result, primary health outcomes improved. For example, by 1990, life expectancy had increased to 71 years, compared to 50.5 years in 1970. In 2019, Algeria’s life expectancy was estimated at roughly 77.7 years, and by 2043, in the Current Path forecast, it is forecast to get to about 80.5 years.

Although Algeria has continued to invest in its health sector, it needs to invest in the treatment of non-communicable diseases, which are inherently more expensive to diagnose and treat, in light of its growing elderly population who are more predisposed to NCDs. This challenge is further complicated by a shortage of healthcare professionals and social inequalities in the country. [31The Problems of Funding the Health System in Algeria, TJPRC, 2014]

The Health/WaSH scenario improves life expectancy to 81 years at birth compared to 80.5 years in the Current Path forecast by 2043. In this scenario, Algeria’s life expectancy is 8.9 years higher than the continental average of 72.1 years in 2043.

As rates of infant mortality in Algeria are already quite low at 21.7 deaths per 1 000 live births in 2019 (the 9th lowest in Africa), the Health/WaSH scenario has very little impact on reducing infant mortality.

Agriculture scenario

Agriculture scenario

The Agriculture scenario represents reasonable but ambitious increases in yields per hectare (reflecting better management and seed and fertilizer technology), increased land under irrigation and reduced loss and waste. Where appropriate, it includes an increase in calorie consumption, reflecting the prioritisation of food self-sufficiency above food exports as a desirable policy objective.

The intervention is explained in here in the thematic part of the website.

The data on yields per hectare (in metric tons) is for crops but does not distinguish between different categories of crops.

Due to the vast expanse of the Sahara Desert, Algeria has only about 8.4 million hectares of arable land which account for less than 4% of the total land area. Just over 50% of the arable land is dedicated to the cultivation of crops, mostly cereals and pulses.

Nevertheless, agricultural crop yields are quite low. In 2019, Algeria’s average yield of 2.9 metric tons per hectare was closer to the average for low-income African countries (2.7 tons per hectare) than to the average of lower middle-income countries in Africa (5.1 tons per hectare). Algeria’s heavy reliance on commodity exports (aka Dutch disease) makes agriculture and manufacturing less competitive. [32T Hinane El Kadi, 15 June 2020.]

Because there is very limited scope to increase land under cultivation, intensive agricultural practices are the only ways to improve efficiency in the sector: Algeria must grow crops for which it has a comparative advantage in, like fruits and vegetables which would produce better yields. Additionally, decreases in loss and waste from production to consumption could help to meet food demand.

In the Agriculture scenario, crop yields improve from about 2.9 tons per hectare in 2019 to 5 tons per hectare in 2043, compared to 3.7 tons in the Current Path forecast. The average crop yield for lower middle-income countries on the continent is 5.1 tons in 2019, improving to 6.1 tons per hectare in 2043.

 

Owing to poor yields and diet preferences, Algeria’s import bill for foodstuffs is substantial. Improvements in the agriculture sector would yield a reduction in the import dependence.

In 2019, agriculture imports constituted 43% of demand and remain roughly constant to 2043. In the Agriculture scenario, net import dependence as a percent of demand falls to 26.7% in 2043. This reduction in imports could release funds for other productive investments in the economy. It would also make Algeria less vulnerable to shocks in international prices which jeopardise its food security situation.

n 2016, the agricultural sector was estimated to employ nearly 20% of the rural population. Approximately 70% of farming activities were considered to be small-scale, and families depended on farming for food security. [33Food and Agriculture Organisation of the United Nations (FAO), Family Farming Knowledge Platform]

Given its importance to the Algerian economy (12% of the economy in 2019), particularly for the rural population, the Agriculture scenario makes a significant impact on GDP per capita in the country. By 2043 the Agriculture scenario improves GDP per capita by US$502 so that Algerians are earning on average US$16 928. This is US$7 786 more than the average of lower middle-income countries in Africa.

Agriculture is one of the most effective ways to alleviate rural poverty. In the Agriculture scenario, at the US$3.20 per person per day extreme poverty threshold, by 2043, relative to the Current Path forecast at about 5.7%, the Agriculture scenario records a 5.2% rate, representing 263 000 fewer people in extreme poverty.

Education scenario

Education scenario

The Education scenario represents reasonable but ambitious improved intake, transition and graduation rates from primary to tertiary levels and better quality of education. It also models substantive progress towards gender parity at all levels, additional vocational training at secondary school level and increases in the share of science and engineering graduates.

The intervention is explained in here in the thematic part of the website.

Although Algeria is considered to have achieved universal primary education and generally records good educational outcomes, significant issues have emerged in the education system.

The average years of education in the adult population (aged 15 years and older) serves as a good first indicator of the stock of knowledge in society. Improvements in the average years of education slowed down in Algeria from 1995 at the height of the civil war and only regained an upward trajectory after 2005. The average years of education for adults aged 15 years and over stood at 7.4 years in 2019 and is projected to improve to 9.3 years by 2043. This is almost a year above the average for lower middle-income countries on the continent. Technically, this means that most Algerians have at least primary education.

In the Education scenario, the mean years of education improves by about two months above the Current Path forecast in 2043.

In the Education scenario, the quality of primary education improves from 36.7 out of a possible 100 in 2019 to 46.6 in 2043, a 16.8% increase compared to the Current Path forecast. In addition, the quality of secondary education goes from 46.4 in the Current Path forecast for 2043 to 55.7, a 20% improvement

Given how long it takes for the benefits of formal education to manifest, concerted efforts and investments must be made to improve Algeria’s quality of education, especially at the secondary level where the bottlenecks are most evident. Issues of general geographic and income inequalities, teaching methods, curriculum and language of instruction at various stages of the education system are some of the challenges that plague education in Algeria.

By 2043, the Education scenario increases GDP per capita by US$371 above the US$16 426 in the Current Path forecast.

It takes several years for education to substantially lift people out of poverty. Using the US$3.20 lower middle-income extreme poverty line, by 2043 the Education scenario will record a poverty rate of 4.9% (2.81 million people) compared to 5.7% (3.3 million people) in the Current Path forecast.

Manufacturing/transfers scenario

Manufacturing/transfers scenario

The Manufacturing/Transfers scenario represents reasonable but ambitious manufacturing growth through greater investment in the economy, investments in research and development, and promotion of the export of manufactured goods. It is accompanied by an increase in welfare transfers (social grants) to moderate the initial increases in inequality that are typically associated with a manufacturing transition. To this end, the scenario improves tax administration and increases government revenues.

The intervention is explained in here in the thematic part of the website.

Chart 31 should be read with Chart 8 that presents a stacked area graph on the contribution to GDP and size, in billion US$, of the Current Path economy for each of the sectors.

The manufacturing sector is important to creating jobs and increasing the rate of employment, improving productivity, changing the structure of an economy and ultimately reducing poverty. In the Manufacturing/Transfers scenario, the contribution of manufacturing is projected to make the greatest increase in GDP until around 2038; thereafter, services make the largest contribution. By 2043 the manufacturing sector is US$9.9 billion larger in the Manufacturing/Transfers scenario compared to the Current Path forecast, coming in second after the service sector at a value of roughly US$144.2 billion.

 

The Manufacturing/Transfers scenario also increases welfare transfers to unskilled workers by US$22.4 billion more than the Current Path forecast of US$51.8 billion. 

To make the social safety net programmes more effective at reducing poverty, better targeting and efficient approaches are critical; for example, fuel subsidies disproportionately benefit the middle- and upper class.

In the Manufacturing/Transfers scenario, GDP per capita increases by approximately US$446 more than in the Current Path at US$15 097 in 2033. By 2043 the average Algerian would earn US$17 048 in this scenario compared to US$16 426, a 3.8% increase above the Current Path forecast for that year.

In the medium-term, the Manufacturing/Transfers scenario reduces poverty but the impact tapers off towards the end of the forecast horizon. By 2033, 1.86 million fewer people are living in extreme poverty relative to the Current Path forecast—roughly 7.85 million people (or an extreme poverty rate of 11.5%). The impact reduces thereafter. By 2043 the scenario does not have much impact on poverty compared to the Current Path forecast as these measures should be accompanied by increased economic opportunities and greater employment creation.

Leapfrogging scenario

Leapfrogging scenario

The Leapfrogging scenario represents a reasonable but ambitious adoption of and investment in renewable energy technologies, resulting in better access to electricity in urban and rural areas. The scenario includes accelerated access to mobile and fixed broadband and the adoption of modern technology that improves government efficiency and allows for the more rapid formalisation of the informal sector.

The intervention is explained in here in the thematic part of the website.

Fixed broadband includes cable modem Internet connections, DSL Internet connections of at least 256 KB/s, fibre and other fixed broadband technology connections (such as satellite broadband Internet, ethernet local area networks, fixed-wireless access, wireless local area networks, WiMAX, etc.).

Algeria has relatively good basic infrastructure, however, the rate of fixed broadband per 100 subscriptions is still below 50. By 2033, in the Leapfrogging scenario, Algeria’s fixed broadband subscriptions will be 49.9 per 100 subscriptions compared to 25.3 in the Current Path forecast. This rate, however, remains stagnant to 2043, although the Current Path forecast is projected to achieve 36.4 subscriptions per 100 people by then. Algeria’s rate will still be higher than the projected average of 26.5 for lower middle-income countries in Africa.

Utilising technology and transitioning into a digital economy is imperative for Algeria, especially given its ageing population. This would help to increase and to sustain productivity in the long-term when its working-age population reduces and TFR falls below replacement levels, like most European countries.

Mobile broadband refers to wireless Internet access delivered through cellular towers to computers and other digital devices.

Mobile broadband subscriptions per 100 people in Algeria in 2019 (at 112) was significantly above the average for lower middle-income Africa (at only 49). This means that many people have more than one phone from which they can access the Internet. In fact, mobile technology played a huge role in the mobilisation of Algerians to protest in and to sustain the Hirak movement.

By 2033, mobile broadband subscriptions are projected to be 152.5, and by 2043 they will reach 153.2 subscriptions per 100 people. The slow growth reflects high levels of saturation.

Algeria has already achieved universal electricity access. However, electricity access will slightly drop over the forecast horizon by a marginal percentage point of about 0.56 by 2043. Regardless, Algeria will still be above the universal access threshold at over 99%.

By 2033 GDP per capita in the Leapfrogging scenario will be at US$15 238, compared to US$15 097 in the Current Path forecast, a difference of US$141. In 2043, this difference is slightly larger at US$251 more than the Current Path forecast at US$16 426.

Algeria already performs well in access to electricity and ICT and mobile phone penetration; therefore, the Leapfrogging scenario has little impact on poverty and by the end of the forecast horizon in 2043, its impact is just about on par with the Current Path forecast at 5.7% extreme poverty rate.

Free Trade scenario

Free Trade scenario

The Free Trade scenario represents the impact of the full implementation of the African Continental Free Trade Area (AfCFTA) by 2034 through increases in exports, improved productivity and increased trade and economic freedom.

The intervention is explained in here in the thematic part of the website.

Most of Algeria’s trade is with the European Union despite the fact that Algeria’s trade complementarity with the Maghreb region is nearly identical to that of Europe, and, in some instances, better. For example, instead of trading with Mauritania and Morocco, where Algeria’s trade complementarity index was higher in 2016, it mostly traded with Italy. Trade within the North African region is very limited and Algeria’s poor export performance reflects this. In fact, the Maghreb is the least economically integrated bloc in the world with a share of intra-regional trade of around only 5% of total trade. The lack of regional integration is a significant obstacle to diversification and growth for countries in the region. A mere 4% of Algeria’s trade is within the Maghreb and the 1 600 km border between Algeria and Morocco has been closed since 1994, reflecting the extent to which the fraught political relations in the region determine economics. [34AP Kireyev et al, Economic Integration in the Maghreb: An Untapped Source of Growth, February 2019, IMF]

Algeria’s trade balance was historically positive but started experiencing a deficit in late 2012. In 2018, Algeria had a trade deficit of about US$17.8 billion.

Economic integration could potentially accelerate growth in the Maghreb, if regional considerations and the restrictions on trade and capital flows that constrain regional integration are removed or reduced. However, except for Morocco, instead of increasing, trade openness has steadily declined in the region and traders face significant hurdles. [35AP Kireyev et al, Economic Integration in the Maghreb: An Untapped Source of Growth, February 2019, IMF]

In the Free Trade scenario, the trade balance performs better than in the Current Path forecast until around 2033, although Algeria is already recording a negative trade balance. Thereafter, the country maintains its status as a net importer.

 

In the Current Path forecast, GDP per capita increases from US$14 802 in 2019 to US$16 426 in 2043 but would be US$17 505 in the Free Trade scenario, an increase of US$ 1 079 above the Current Path forecast for that year.

Because of more rapid economic growth, the Free Trade scenario slightly decreases poverty by just over a percentage point at 13.9%, compared to the Current Path forecast at 15% in 2033. By 2043 Algeria would record a drop in extreme poverty to 4.23% relative to the Current Path forecast at 5.7%.

Financial Flows scenario

Financial Flows scenario

The Financial Flows scenario represents a reasonable but ambitious increase in worker remittances and aid flows to poor countries, and an increase in the stock of foreign direct investment (FDI) and additional portfolio investment inflows to middle-income countries. We also reduced outward financial flows to emulate a reduction in illicit financial outflows.

The intervention is explained in here in the thematic part of the website.

Compared to many countries in sub-Saharan Africa, which are still heavily dependent on foreign aid for the provision of basic services like education and health, aid constituted only about 0.24% of Algeria’s GDP (around US$635 million) in 2019.

In the Financial Flows scenario, foreign aid will constitute only 0.05% of GDP in 2033 and 0.01% of GDP by 2043.

Algeria attracts significantly lower levels of FDI as a per cent of GDP compared to the averages for lower middle-income countries and even North African countries. [36The Arab Weekly, Algeria lags behind neighbours in attracting foreign direct investment, July 2018]

Since the Arab Spring, FDI from Europe into Algeria and the region has declined, although Gulf investors have shown greater interest. China has also increased its investments in Algeria over the past two decades, recently taking over France's historical position as the largest investor mainly in the construction and mining sectors. Algeria is considered to be a close ally of Beijing and the two countries have a strategic partnership. [37T Hinane El Kadi, 15 June 2020.]

According to the United Nations Conference on Trade and Development’s World Investment Report of 2019, FDI inflow fell from roughly US$1.6 billion to US$1.2 billion between 2016 and 2017 but improved to US$1.5 billion in 2018. The stock of FDI was estimated at a meagre US$30.6 billion in 2018. The World Bank ranked Algeria at a lowly 157th out of 190 countries in their Doing Business 2020, which measures aspects of business regulation and their implications for firm establishment and operations. [38Santander Trade Portal, Algeria: Foreign Investment]

Numerous regulatory and practical hurdles constrain FDI in Algeria. The World Economic Forum [39World Economic Forum, How Algeria can boost its economy, April 2019] lists impenetrable markets, protectionism, corruption, weak and overregulated digital and e-commerce economy, weak intellectual property laws and bureaucracy as obstacles to investment.

In the Financial Flows scenario, FDI inflows are projected to account for about 2.14% of GDP compared to about 1.7% of GDP in the Current Path forecast.

In Algeria, remittances, especially foreign pensions, reduce poverty and inequality, leading to a nearly 4% reduction in their respective regional Gini indices. [40DN Margolis et al, ‘To Have and Have Not’: Migration, Remittances, Poverty and Inequality in Algeria, November 2013]

In the Financial Flows scenario, net remittances would decline from 0.7% of GDP in 2019 to 0.37% of GDP in 2043 (US$1.7 billion), compared to 0.28% (US$1.3 billion) in the Current Path forecast.

The Financial Flows scenario makes a small impact of US$22 on GDP per capita of Algeria compared to the Current Path forecast in 2043. This is likely because it receives little foreign aid, FDI is largely concentrated in the capital intensive energy industry with limited forward and backward linkages into the domestic economy while the limited number of remittances are largely used for household consumption.

The Financial Flows scenario reduces the number of extremely poor Algerians by 93 000 in 2043, compared to the Current Path forecast, using the US$3.20 threshold. This is because FDI is concentrated in the energy sector which does not have strong forward linkages in terms of job creation and employment, aid forms a negligible part of revenue in the country and remittances just keep families from sliding into extreme poverty as they are largely for household consumption benefits. Whereas 15% of Algeria’s population lived in extreme poverty in 2019, by 2043 it would be 5.5% in the Financial Flows scenario compared to 5.7% in the Current Path forecast.

Infrastructure scenario

Infrastructure scenario

The Infrastructure scenario represents a reasonable but ambitious increase in infrastructure spending across Africa, focusing on basic infrastructure (roads, water, sanitation, electricity access and ICT) in low-income countries and increasing emphasis on advanced infrastructure (such as ports, airports, railway and electricity generation) in higher-income countries.

Note that health and sanitation infrastructure is included as part of the Health/WaSH scenario and that ICT infrastructure and more rapid uptake of renewables are part of the Leapfrogging scenario. The interventions there push directly on outcomes, whereas those modelled in this scenario increase infrastructure spending, indirectly boosting other forms of infrastructure, including that supporting health, sanitation and ICT.

The intervention is explained in here in the thematic part of the website.

Algeria has already achieved universal electricity access with rates at over 99% which is above the threshold of 97% that is considered to be the universal access rate. Other indices (not shown) show larger improvements such as sanitation access. The average for lower middle-income Africa in 2019 was 66%, a rate forecast to increase to 82% by 2043.

Indicator 9.1.1 in the Sustainable Development Goals refers to the proportion of the rural population who live within 2 km of an all-season road and is captured in the Rural Access Index.

Algeria already has excellent all-season road access, comparable to that of Egypt and Libya in North Africa. In 2019, 86.2% of the rural population had access within 2 km to an all-weather road while the average for lower middle-income African countries was a mere 61.4%. The Infrastructure scenario increases all-season rural road access of the rural population in Algeria to 93.8% in 2043, compared to 91.4% in the Current Path forecast.

Most of Algeria’s population lives in the northern areas close to the Mediterranean coast (see Chart 4 for population distribution map) which is heavily urbanised since the rest of the country is predominantly desert.

The average all-season road access for rural populations in lower middle-income African countries is much lower, at 66% in 2019, improving to 82% in the Current Path forecast.

Increased investment in infrastructure improves connectivity for movement of people and goods in Algeria. In 2043, GDP per capita for Algeria would be US$16 775, compared to US$16 426 in the Current Path forecast by then, an improvement of 2%.

Algeria’s basic infrastructure is relatively good and the Infrastructure scenario reduces the number of extremely poor people (using the US$3.20 threshold) by 177 000 people in 2033 and by 267 000 people in 2043. Instead of 5.7% people living below US$3.20, Algeria will only have 5.2% extremely poor people in 2043.

Governance scenario

Governance scenario

The Governance scenario represents a reasonable but ambitious improvement in accountability and reduces corruption, and hence improves the quality of service delivery by government.

The intervention is explained in here in the thematic part of the website.

As defined by the World Bank, government effectiveness ‘captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies’.

According to the World Bank Governance Effectiveness Index, Algeria does much better than its lower middle-income peers in Africa, although improvements to 2043 are forecast to be modest. Because of slow improvements in Algeria, it starts falling below the average for lower middle-income countries in Africa after 2033.

Among North African countries, Morocco and Tunisia scored higher than Algeria in 2019. The Governance scenario increases government effectiveness by 5.6% over the Current Path forecast at 2.12 in 2033. By 2043 the index improves to 2.28 compared to 2.14 in the Current Path forecast, a 6.5% improvement in that year.

Even with the interventions that form part of the Governance scenario, Egypt does better on government effectiveness than Algeria by 2043, and the latter starts falling behind the more rapid improvements among lower middle-income countries in Africa.

The Governance scenario increases GDP per capita to about US$16 775 compared to US$16 426 in the Current Path forecast in 2043. By 2043 the average Algerian would have US$349 more relative to the Current Path, a 2% increase in that year.

By 2043 the Governance scenario reduces the number of extremely poor people (using US$3.20) by half a percentage point, equivalent to 265 000 fewer extremely poor people. Instead of 3.2 million people surviving on US$3.20 in 2043, only 3 million will do so.

Impact of scenarios on carbon emissions

Impact of scenarios on carbon emissions

This section presents projections for carbon emissions in the Current Path for Algeria and the 11 scenarios. Note that IFs uses carbon equivalents rather than CO2 equivalents.

In 2019 Algeria released 45 million tons of carbon and in the Current Path forecast will release 69 million tons by 2043, an increase of 65%. Although carbon emissions are set to increase with increased economic activity, Algeria’s carbon emissions come from a very low base compared to developed and emerging economies. Like many developing countries, Algeria will disproportionately suffer the impact of climate change which it has contributed very little to. Nonetheless, Algeria must reduce its carbon footprint and move towards renewable energy for sustainable growth and to mitigate the impact of climate change.

By 2043, Free Trade, Stability, Manufacturing/Transfers and Agriculture scenarios will be the leading causes of increased carbon emissions, while carbon emissions in the Demographic scenario, with its smaller population, will be slightly lower than the Current Path forecast.

 

Combined Agenda 2063 scenario

Combined Agenda 2063 scenario

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The Combined Agenda 2063 scenario consists of the combination of all 11 sectoral scenarios presented above, namely the Stability, Demographic, Health/WaSH, Agriculture, Education, Manufacturing/Transfers, Leapfrogging, Free Trade, Financial Flows, Infrastructure and Governance scenarios. The cumulative impact of better education, health, infrastructure, etc. means that countries get an additional benefit in the integrated IFs forecasting platform that we refer to as the synergistic effect. Chart 55 presents the contribution of each of these 12 components to GDP per capita in the Combined Agenda 2063 scenario.

In the Combined Agenda 2063 scenario, Algeria is able to set itself on a new economic and governance pathway with a government that facilitates the creation of a social compact and substantively improves democracy, accountability and service delivery that benefits all Algerians.

Algeria is an anocratic regime, i.e. mixed or hybrid (consisting of countries that score from -5 to +5 on the Polity V index). Anocratic regimes are inherently unstable because they have elements of democracy, such as regular elections that raise expectations for citizens’ power and participation but co-exist with elements of autocracy (like limited legislative powers) as evident in Algeria.

Algeria is significantly less democratic than would be expected given its levels of GDP per capita and average levels of education. The result, evident in the Hirak movement, is significant pressure for political reform.

The Algerian government has managed to provide impressive levels of access to basic services such as infrastructure, healthcare and education on top of substantive subsidies on foodstuffs and petroleum that have muted levels of instability that follows its large youth bulge and steady increases in levels of education. An increasingly youthful population (aged 15 to 29 years) that is better educated and connected have not, however, been able to find secure employment in the formal sector.

Algeria’s large security establishment that effectively countered terror helped to quell protests during the first wave of the Arab Spring. However, it is faced with dwindling oil and gas reserves and it seems inevitable that Algeria has to diversify its economy and shift to a more sustainable (and inclusive) governance approach based on a new social contract that provides more targeted and limited subsidies, less corruption and cronyism and greater room for economic opportunity.

In the forecast horizon, the Free Trade, Stability, Manufacturing/Transfers and Agriculture scenarios have the greatest impact on improved GDP per capita. These point to the inefficiencies of Algeria’s economy, particularly to expand value-added trade and ability to expand manufacturing and better targeting its subsidies. The performance of the Stability scenario also illustrates the importance of a predictable and investment-friendly business environment to Algeria’s growth.

 

Chart 55 presents a stacked area graph on the contribution of each scenario to GDP per capita as well as the additional benefit or synergistic effect, whereas Chart 56 presents only the GDP per capita in the Current Path forecast and the Combined Agenda 2063 scenario.

The Combined Agenda 2063 scenario has a much greater impact on GDP per capita compared to the individual thematic scenarios. By 2033 GDP per capita of Algeria is US$2 060 larger than in the Current Path forecast at US$15 097, and by 2043 it would come to US$21 244, i.e. US$4 818 more than in the Current Path forecast in that year.

In the Combined Agenda 2063 scenario, by 2033, only about 6.6% of Algerians will be living in extreme poverty (at the US$3.20 threshold) compared to 15% in the Current Path forecast. This represents about 4.4 million fewer people living in extreme poverty relative to 7.85 million in the Current Path forecast. By 2043, extreme poverty reduces to roughly 1.5% (835 000 people) compared to 5.7% in the Current Path forecast with at least 3.25 million people in extreme poverty.

See Chart 8 to view the Current Path forecast of the sectoral composition of the economy.

Initially, agriculture will make the greatest contribution to GDP, however after 2030, it will be outpaced by the service and manufacturing sectors. In the Current Path forecast, the contribution from the energy sector increases from 16% in 2019 to 23.5% by 2043, and in the Combined Agenda 2063 scenario the contribution from the energy sector is much more modest given the rapid growth in other sectors and contributes only 18% to the economy by 2043. In absolute dollar terms, the service and the manufacturing sectors will contribute the most to the country’s economy at US$227.8 billion and US$206.8 billion in 2043, reflecting an increase of US$84.91 billion and US$72.49 billion above the Current Path forecast for that year, respectively.

By 2043 Algeria’s economy will be 41.4% (or US$192.6 billion) larger in the Combined Agenda 2063 scenario than in the Current Path forecast (the numbers are US$658.25 billion compared to US$465.7 billion in the Current Path forecast).

In the Combined Agenda 2063 scenario, carbon emissions increase to 78.3 million tons of carbon in 2043 compared to 69.4 million tons of carbon in the Current Path forecast, a difference equivalent to an increase of 13%.

Endnotes

  1. World Population Review, Algeria population , 2019

  2. IK Harb, Challenges facing Algeria’s future, July 2017, المركز العربي بواشنطن (Arab Center Washington DC)

  3. See, for example, R Dhaouadi, Cross-border smuggling: What drives illicit trade in North Africa?, ENACT Project, 5 July 2019

  4. Bouteflika had, in 2016, engineered a constitutional amendment that limits presidential terms to two, but since it was not retroactive, it allowed him to stand for a fifth term.

  5. A Boubeker, Demonstration effects: How the Hirak protest movement is reshaping Algerian politics, February 2020

  6. The Guardian, Mass boycott and police clashes as Algeria holds disputed elections, The Guardian, December 2019

  7. I Pool, 2012, Demographic Turbulence in the Arab World: Implications for Development Policy, Journal of Peacebuilding & Development, 7(1), pp.33–50

  8. F Sahnoune, M Belhamel, M Zelmat, R Kerbachi, 2013, Climate Change in Algeria: Vulnerability and Strategy of Mitigation and Adaptation, Energy Procedia, 36, pp. 1286-1294

  9. Republique Algerienne Democratique et Populaire, National Report on Housing for the Conference on Housing Habitat III, July 2014

  10. World Population Review, Algeria population 2019

  11. E Stuart, Algeria’s new hydrocarbon law comes into force amid output slump, January 2020, S&P Global Platts ; H Saleh, Algeria faces economic crunch as oil and gas revenues fall short, March 2019, Financial Times

  12. World Bank, How is Algeria reacting to low oil prices?, July 2016

  13. World Economic Forum, How Algeria can boost its economy, April 2019

  14. World Economic Forum, How Algeria can boost its economy, April 2019

  15. A Lotfi, N Benjamin, S Bensassi and G Raballand, 2013, Estimating informal trade across Tunisia's land borders (English). Policy Research working paper; no. WPS 6731, Washington, DC: World Bank Group

  16. A Lotfi, N Benjamin, S Bensassi and G Raballand, 2013, Estimating informal trade across Tunisia's land borders (English). Policy Research working paper no. WPS 6731, Washington, DC: World Bank Group

  17. United Nations Economic Commission for Africa, Country Profile-Algeria, 2016

  18. J Andrew, The need for subsidy reform in Algeria, August 2016

  19. World Bank, Poverty has fallen in the Maghreb but inequality persists, October 2016

  20. World Bank, Poverty has fallen in the Maghreb but inequality persists, October 2016

  21. United Nations Economic Commission for Africa, Country Profile-Algeria, 2016

  22. Reuters, Algeria plans $3bln solar power projects for home demand and exports, May 2020

  23. CDER, Algerian Portal of Renewable Energy

  24. T Hinane El Kadi, 15 June 2020, The lack of ‘will’ by governments to engage in restructuring efforts is explained by Karl (1997) as situations of ‘arrested institutional adjustment’, whereby strong rentier constituencies block reforms as they hold vested interests in the existing order. In an influential book, Winners and Losers: How Sectors Shape the Developmental Prospects of States, Shafer (1994) argues that dominant sectors characterised by capital intensiveness, such as minerals and oil, create powerful lobbies that pressure state incumbents to maintain the status quo as a prerequisite for their political survival despite long term welfare loss.

  25. EIA, Algeria

  26. S Haddoum, H Bennour, T Ahmed Zaïd, 2018, Algerian Energy Policy: Perspectives, Barriers and Missed Opportunities, Global Challenges, 2(8), 1700134

  27. HO Ahmed, Algeria shelves subsidy reforms before presidential elections, November 2018, Reuters

  28. Reuters, Algeria aims for subsidy reform in budget plan, October 2021

  29. P Friedlingstein et al, 2020, Global Carbon Budget 2020, Earth System Science Data, 12, 3269–3340

  30. B Amel, Demonstration effects: How the Hirak protest movement is reshaping Algerian politics, February 2020

  31. The Problems of Funding the Health System in Algeria, TJPRC, 2014

  32. T Hinane El Kadi, 15 June 2020.

  33. Food and Agriculture Organisation of the United Nations (FAO), Family Farming Knowledge Platform

  34. AP Kireyev et al, Economic Integration in the Maghreb: An Untapped Source of Growth, February 2019, IMF

  35. AP Kireyev et al, Economic Integration in the Maghreb: An Untapped Source of Growth, February 2019, IMF

  36. The Arab Weekly, Algeria lags behind neighbours in attracting foreign direct investment, July 2018

  37. T Hinane El Kadi, 15 June 2020.

  38. Santander Trade Portal, Algeria: Foreign Investment

  39. World Economic Forum, How Algeria can boost its economy, April 2019

  40. DN Margolis et al, ‘To Have and Have Not’: Migration, Remittances, Poverty and Inequality in Algeria, November 2013

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Cite this research

Jakkie Cilliers (2022) Algeria. Published online at futures.issafrica.org. Retrieved from https://futures.issafrica.org/geographic/countries/algeria/ [Online Resource] Updated 10 August 2022.