Algeria
In-depth country-focused analysis on Algeria’s economic, political and operational risk environment, complemented by detailed sector insight

Algeria’s government responded swiftly to public demonstrations at the height of the Arab Spring by granting a series of reforms that appeased protesters. Elevated international energy prices have bolstered the country's fiscal accounts in the past few years, and we do not expect weaker oil prices to lead to a fundamental turnaround in the government's expansionary fiscal policy. Investments into the oil and gas sector continue to be prioritised by Algeria’s government.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 10 of Algeria’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Algeria.

Country Risk

Algeria Country Risk

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Core Views

  • Weaker oil prices will put strains on the Algerian economy over the coming years, and we forecast real GDP growth to slow to 2.6% in 2015 from 2.8% in 2013. Slower growth in public spending, lower consumer and business confidence, and the depreciation of the dinar will all weigh on economic activity.

  • The Algerian monetary authorities will allow the dinar to depreciate further over 2015, in response to lower oil prices and the strength of the US dollar. We forecast the currency to trade at an average of DZD95.0/USD this year, compared to DZD80.6/USD in 2014. In view of Algeria's limited domestic production base, the depreciation will trigger higher inflation and weigh on economic activity.

  • While lower oil prices will put further pressure on the Algerian regime over the coming years, we do not expect a return to the unrest...

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Algeria Industry Coverage (10)

Agribusiness

Algeria Agribusiness

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BMI View: With wheat and dairy production falling consistently short of consumption, Algeria is a major importer of food products. However, the government's new emphasis on improving food self-sufficiency is helping the grains and dairy sectors to rebound. Increases in government support will be positive for productivity and product quality in the medium term. However, the country will remain a key importer of wheat and dairy products in the coming years. Algeria is increasingly expanding trading links with countries such as Brazil and India, especially for dairy and beef products,...

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Autos

Algeria Autos

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In November 2014, French carmaker Renault started commercial production at its new EUR50mn (USD62mn) plant at Oued Tielat, in line with its plan to increase its exposure in the MENA region (see Company Profile section of this report for more information). While the plant is undoubtedly a big part of Renault's strategy, as it increasingly shifts production to new international bases, we also see the plant as being crucial to the Algerian government's efforts to diversify its economy, as Renault's local content plans bring new skills to the country.

With an initial annual production capacity of 25,000 units, the plant accounts for a small fraction of the domestic new vehicle sales market, which stood at some 339,094 units in 2014. However, Renault has plans to triple this output to 75,000 units by 2019 and, more significantly, to increase the level of local content in the models produced by this...

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Food & Drink

Algeria Food & Drink

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BMI View: We project real private consumption growth of 5.0% in 2015, down from an annualised rate of 5.5% in 2009-13. While favourable demographics and the state's continuing support to household incomes (through transfers, subsidies, and public sector jobs) will help to prop up consumer goods purchases, the dinar's depreciation and weaker consumer confidence present new headwinds. Consumer price inflation is set to pick up, putting pressure on disposable incomes. We forecast inflation to average 4.0% in annual terms in 2015, after a relatively low rate - by Algerian standards - of 2.9% over 2014.

Headline Industry Data (local currency)

  • 2015 per capita food consumption year-on-...

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Infrastructure

Algeria Infrastructure

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BMI View: Algeria's construction sector saw relatively healthy growth in 2014, and with an uptick in GDP growth forecast in 2015 we expect this trend to continue moving forward. The government is launching an extensive new five-year development programme, including wide-ranging investments across a number of public infrastructure projects, with USD262bn due to be allocated. Prime Minister Abdelmalek Sellal has also reiterated a commitment to encouraging more foreign investment, indicating a range of opportunities for international firms. Despite a contraction in the oil and gas sector, Algeria's large reserves mean we expect to see public spending continue to rise, supporting our positive growth forecasts for the country's construction sector.

The key trends and developments in Algeria's infrastructure sector are:  

  • Construction industry value is expected to...

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Insurance

Algeria Insurance

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BMI View : We see significant potential in North Africa for insurers. However, continued economic constraints will hamper the full development of the sector over the short term, particularly the non-life segment. That being said, strong government impetus in much of the region to augment health insurance density will boost penetration over the medium term. However, we continue to expect life insurance will underperform in comparison to non-life insurance, owing to the disinclination among much of the population to purchase life insurance policies when household budgets...

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Oil & Gas

Algeria Oil & Gas

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BMI View: Rapid depletion at major maturing fields and a lack of new projects slated to come online will drag Algerian oil and gas output into decline, in the second half of our 10-year forecast period. Our bearish outlook is compounded by the sharp fall in global oil prices which - alongside a weak above-ground environment - will severely undercut prospective investments in the sector. We forecast a rapid in rise in domestic oil and gas consumption, fuelled by continued high level subsidisation, which will put increasing strain on the country's export volumes towards the end of the decade.

Headline Forecasts (Algeria 2013-2019)
2013e 2014e ...

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Petrochemicals

Algeria Petrochemicals

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Fertiliser production is increasing in Algeria with a third major complex coming onstream in 2015, but olefins and polymers production will remain small following the cancellation of the planned Arzew petrochemicals complex.

Petrochemicals have major potential as Algeria looks to reduce its reliance on raw commodity prices. Its main value-added products are methanol and fertiliser. Petrochemical exports amount to around two-thirds of Algeria's non-hydrocarbons exports, but hydrocarbons comprise 95% of the country's total exports. Algeria has the fourth-largest oil reserves and second-largest gas reserves in Africa but production has plateaued in recent years.

  • Algeria's petrochemicals market is likely to witness a steady improvement in growth in 2015. This is driven mainly by domestic demand and public investment activity.

  • The fertiliser sector is set to grow in 2015 as...

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Pharmaceuticals & Healthcare

Algeria Pharmaceuticals & Healthcare

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BMI View: The Algerian government's five-year investment and industrial development plan to be implemented from 2015-2019 will provide opportunities to foreign drugmakers looking to enter the Algerian pharmaceutical market or to expand their operations in the region through strategic partnerships or agreements. This is illustrated by several cross-border recent agreements, including a partnership established between multinational pharmaceutical firm AstraZeneca and local drugmaker Saidal to transfer expertise and manufacture locally. Meanwhile, the Algerian government will maintain an expansionary fiscal while pushing forward healthcare facilities construction and modernization, contributing to market growth rates over the next years. However, operating challenges including weak intellectual property law and...

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Power

Algeria Power

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BMI View: Despite Algerian government's efforts to spur the development of renewable energy in the country, conventional thermal sources are expected to remain the dominant fuel for electricity generation in the coming years, with many power projects under construction or planned that will use natural gas. We estimate 2013 total power generation in Algeria was 50.4TWh, having risen 3.8% on the 2012 level. We forecast an average 4.7% annual increase to 60.9TWh between 2012 and 2017. Thermal generation, comprising coal, gas and oil, is expected to grow at a similar pace - by 4.7% per annum and is forecast to reach 60.3TWh during the period to 2017.

We forecast Algeria's power...

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Telecommunications

Algeria Telecommunications

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BMI View : The strong demand for mobile data services in the North African telecoms markets is driving investments in network upgrade and expansion, with operators in Algeria, albeit from a low base, and Morocco leading the way in capital expenditure (capex) spending in 2014. The uptake of 3G network services in this region, aided by the increasing availability of low-cost smartphones, will allow mobile operators diversify their revenue streams away from basic services amid increased regulatory and competitive pressure. Libya is still left out of this development trend, with insecurity and political stability delaying a much-needed liberalisation process in the telecoms sector and...

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