Stagnation or Growth? Algeria’s development pathway to 2040

Algeria's economy is characterized by a heavy reliance on oil and gas, which account for nearly 30% of GDP and over 85% of exports. This dependence, combined with a closed, state-controlled economic model and a large informal sector—estimated to involve 57% of the population—has led to stagnating per capita income and vulnerability to global energy transitions. While the government has introduced a new hydrocarbon law to attract investment and shifted focus toward shale gas, the report argues that true growth requires restructuring the economy to protect non-hydrocarbon sectors and integrating the informal economy into the formal sector.

• Algeria's economy is critically dependent on hydrocarbons, with oil and gas contributing nearly 30% of GDP, 65% of budget revenues, and more than 85% of exports, while providing an estimated 95% of foreign currency receipts.
• The country faces significant fiscal instability; a reversal of fiscal consolidation in 2017 led to a current account deficit of 8.2% of GDP, and official foreign exchange reserves were expected to be depleted by 2024 if spending levels remained constant.
• Economic growth is projected to be slow, with an annual average growth of approximately 1.9% between 2020 and 2040, which is roughly 2.7 percentage points lower than that of other Other Low-Middle Income Countries (OLMICs).
• The hydrocarbon sector is hampered by poor governance, ageing oil fields, and a hostile investment climate. Although a new hydrocarbon law was enacted in January 2020 to offer tax cuts of up to 20% and better contract terms, the country's shift toward shale gas is viewed as inconsistent with long-term diversification goals.
• A massive informal economy exists in Algeria, involving approximately 57% of the population and contributing about 40% to GDP. While it has historically acted as a safety valve for unemployment, it is considered detrimental in the long run due to low productivity and limited tax contributions.

APA

Cilliers, J., & Kwasi, S. (2023). Stagnation or Growth? Algeria’s development pathway to 2040. Institute for Security Studies. https://futures.issafrica.org/special-reports/guide.pdf?report=country/algeria&topic=09-economy

Chicago

Cilliers, Jakkie, and Stellah Kwasi. Stagnation or Growth? Algeria’s development pathway to 2040. Institute for Security Studies, 2023. https://futures.issafrica.org/special-reports/guide.pdf?report=country/algeria&topic=09-economy.

Wikipedia

{{cite report |last1=Cilliers |first1=Jakkie |last2=Kwasi |first2=Stellah |title=Stagnation or Growth? Algeria’s development pathway to 2040 |publisher=Institute for Security Studies |date=8 June 2023 |url=https://futures.issafrica.org/special-reports/guide.pdf?report=country/algeria&topic=09-economy |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cilliers2023stagnation, author = {Cilliers, Jakkie and Kwasi, Stellah}, title = {{Stagnation or Growth? Algeria’s development pathway to 2040}}, institution = {Institute for Security Studies}, year = {2023}, month = jun, url = {https://futures.issafrica.org/special-reports/guide.pdf?report=country/algeria&topic=09-economy}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }