Algeria: Investing in Data Key for Diversified Growth

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Algeria’s economic growth remained dynamic in 2023, with GDP recording a 4.1 percent increase, driven by robust performance in the nonhydrocarbon and hydrocarbon sectors, according to the World Bank’s Spring 2024 Algeria Economic Update. Economic activity was stimulated by dynamic private consumption and strong investment growth, fueling a marked increase in imports. Hydrocarbon production was supported by record-high natural gas production, compensating for the decline in crude oil production amidst voluntary OPEC quota reductions.

Despite the decline in global hydrocarbon prices and an increase in imports causing Algeria’s’ trade balance to shrink, the country’s foreign reserves continued to increase, reaching a comfortable 16.1 months of imports by the end of 2023. Consumer price inflation moderated to 5.0 percent in the first quarter of 2024, down from 9.3 percent in 2023, aided by a strong dinar and a decrease in fresh food and import prices. 

The report underscores the strategic importance of data in informing policy decisions and the potential to leverage alternative data sources to shed light on real-time economic developments in Algeria. These sources, such as satellite data on nighttime lights, crop development, as well as data on shipping vessels arriving at and departing from Algerian ports, can provide a more detailed view of the economy. The report looks at how these data sources represent a useful complement to conventional economic and social statistics while stressing that improving the availability, granularity, and timeliness of official economic data, most notably relating to activity, investment, and the labor market, remains of utmost importance.

“In 2022 and 2023, Algerian authorities accelerated digitalization efforts and elevated the strengthening of data systems as a policy priority,” said Kamel Braham, the World Bank’s Resident Representative to Algeria. “In addition to supporting evidence-based policymaking, robust economic data reduces economic uncertainty and supports investment, growth, and diversification.”

Looking ahead, the report projects a temporary growth slowdown in 2024, followed by a robust recovery in 2025. Despite the positive outlook it finds that continued public spending and import growth amidst moderating hydrocarbon exports would put renewed pressure on the fiscal and trade balances. Additionally, significant uncertainties with respect to global commodity prices and climate conditions remain. 

Cyril Desponts, the World Bank’s Senior Economist for Algeria, underlined the usefulness of alternative data sources, “Unconventional data bring precision to our analysis because they are highly disaggregated across time and space, and available with only a short delay. In early 2024, data suggest that activity remained dynamic across the country, but to a lesser extent in oil-producing regions, affected by quota reductions and that Eastern regions saw a recovery in rainfall and crop development, feeding into our macroeconomic projections.”

The report also highlights the significance of recent reforms and the importance of supporting diversification by accelerating private sector investment in non-hydrocarbon sectors. The 2022 Investment Law, the 2023 Banking and Monetary Law, formal adhesion to the Africa Continental Free Trade Agreement, the 2023 Land Law, and initiation of state-owned bank reforms are all aimed at boosting private investment to foster diversification. Strengthening these efforts is even more important now that public investment, previously the engine of Algeria’s growth, is increasingly constrained by expanding current expenditures.

Distributed by APO Group on behalf of The World Bank Group.

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