Country Economic Forecasts > Algeria

GDP growth slowed to an estimated 2.6% last year from 3.8% in 2014. The World Bank expects growth to accelerate to 3.9% this year but our forecast is more cautious at just 2.7%. The projected uptick in growth will be largely driven by growth in the non-hydrocarbon sector, but will be impeded by restrictions on FDI, an inconsistent regulatory framework, high tax rates, an underdeveloped private sector and a difficult business environment.The fiscal and current account deficits are widening sharply due to collapsing hydrocarbon revenues. The budget deficit is estimated at 18.5% of GDP last year, up from 8.5% in 2014, while the current account deficit is put at US$25bn (equal to 16.5% of GDP). Given the continued oil price slump and rapid depreciation, the twin deficits will remain very high in 2016, putting further pressure on the government to curb spending and limit imports in order to stem the slide in reserves.There is a factional fight within the ruling political-military structure as elites continue to position themselves for the end of the Bouteflika era. Governance is set to deteriorate exacerbated further by the fiscal squeeze and the coming transition may well be messy.