Algeria’s Economy Grows 3.6% in 2024: A Comprehensive Analysis

Algeria’s economy grew by 3.6% in 2024, outperforming the global average of 3.3%, according to the Bank of Algeria’s annual report published on September 17.

The central bank highlighted that while growth remained strong, it was slightly lower than the 4.1% recorded in 2023. The decline was mainly due to reduced added value in the hydrocarbon sector, which had posted growth the previous year.

Non-Hydrocarbon Sectors Drive Resilience

Despite hydrocarbons weighing down overall GDP, non-hydrocarbon activity accelerated to 4.8% in 2024, compared with 4.2% in 2023. Growth was led by services (+4.5%), agriculture and fishing (+5.1%), construction (+3.6%), and electricity and gas production (+5.8%).

The industrial sector expanded by 5.8%, slightly below the 6.3% achieved in 2023. This growth indicates a shift towards a more diversified economy, which is essential for long-term stability.

Inflation Down, but Balance of Payments Weakens

Inflation fell sharply, dropping from 7.18% in 2023 to 4.4% in 2024. However, after two years of surpluses, the balance of payments slipped into near-equilibrium at -$0.498 billion.

The Bank of Algeria attributed this to an 11.68% drop in exports, largely caused by falling global hydrocarbon prices. In addition, there was a 5.82% rise in imports of equipment, foodstuffs, and semi-finished goods.

As a result, foreign exchange reserves declined by $1.5 billion, from $69.8 billion at the end of 2023 to $68.2 billion at the end of 2024. Despite this decline, reserves still cover more than 15 months of imports, exceeding international standards.

Rising Deficits Amid Declining Revenues

Public finances deteriorated significantly in 2024. The budget deficit widened to 13.78% of GDP, and the overall deficit reached 13.91%. This was mainly driven by a 22.66% fall in revenues, including a 31.13% drop in hydrocarbon income and a 13.5% fall in non-hydrocarbon revenues. Expenditures also increased by nearly 9%.

The Bank of Algeria urged authorities to improve tax collection outside hydrocarbons and tighten spending to protect fiscal stability. These measures are crucial for maintaining economic health.

Currency Strengthens, Lending Expands

The Algerian dinar appreciated against major currencies in 2024. It rose by 1.32% against the US dollar, 1.24% against the euro, 8.56% against the Japanese yen, and 2.93% against the Chinese yuan.

Meanwhile, bank lending to the economy increased by 5.3% to 11,256.5 billion dinars. Public banks contributed 72.9% of the increase, while private banks accounted for 27.1%.

The public sector secured 4,567.6 billion dinars in financing, while the private sector received 6,688.9 billion dinars. This increase in lending is a positive sign for economic growth.

Future Challenges and Opportunities

The Bank of Algeria warned that continued pressure on hydrocarbon prices and global uncertainties could strain public finances further. Diversifying revenue sources and strengthening non-hydrocarbon growth remain key priorities for economic stability.

Importance of Diversification

Diversification is essential for reducing reliance on hydrocarbons. The government must invest in various sectors to create a more resilient economy. This includes enhancing infrastructure, promoting tourism, and supporting small and medium-sized enterprises.

Strengthening Non-Hydrocarbon Growth

To achieve sustainable growth, Algeria must focus on developing its non-hydrocarbon sectors. This involves creating favorable conditions for businesses, improving education and training, and fostering innovation.

Conclusion

In conclusion, Algeria's economy has shown resilience in 2024, with a growth rate of 3.6%. However, challenges remain, particularly in the hydrocarbon sector. The focus must shift towards diversification and strengthening non-hydrocarbon growth to ensure long-term economic stability.

The path forward requires strategic planning and implementation of effective policies. By addressing these challenges, Algeria can position itself as a stable and prosperous economy in the region.

For those interested in Algeria's economic landscape, staying informed about these developments is crucial. The future of Algeria's economy depends on the actions taken today.

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