Algeria's economy is set to grow in 2025, supported by a recovery in hydrocarbon output and stable inflation, according to the International Monetary Fund (IMF). However, the Fund warned of mounting fiscal pressures that could undermine economic stability if not addressed. In a statement following the conclusion of its 2025 Article IV consultation, the IMF said that while near-term prospects remain broadly positive, Algeria faces significant medium-term risks stemming from high budget deficits, falling hydrocarbon revenues, and rising public debt. Real GDP growth slowed to 3.6 per cent in 2024, down from 4.1 per cent in 2023, as oil production cuts took effect. Nonhydrocarbon sectors remained resilient, expanding by 4.2 per cent. Inflation dropped to 4 per cent in 2024 from 9.3 per cent the previous year, while foreign reserves held steady at $67.8 billion—enough to cover 14 months of imports. Despite easing inflation, the fiscal deficit widened sharply to 13.9 per cent of GDP in 2024 and is expected to stay high in 2025. The IMF cautioned that sustained deficits, coupled with global uncertainty and volatile energy prices, could widen the current account gap and increase financing pressures. To mitigate these risks, the IMF called for gradual fiscal consolidation, including reforms to broaden the tax base, phase out untargeted subsidies, and improve the efficiency of public spending. It also recommended greater exchange rate flexibility and enhanced oversight of state-owned enterprises and public banks. The Fund welcomed recent steps to improve transparency, strengthen monetary policy, and attract private investment but stressed that deeper structural reforms are needed to diversify the economy and create sustainable jobs. Attribution: Amwal Al Ghad English
