Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is difficult. Corporate financial information is often unavailable and when available often unreliable. Debt collection is unpredictable. The institutional framework has many troublesome weaknesses. Intercompany transactions run major risks in the difficult environments rated C.


  • Significant oil and gas reserves
  • Potential in the fields of renewable energy and tourism
  • Solid external financial position (very low external indebtedness, significant foreign exchange reserves)


  • Highly dependent on hydrocarbons and problems using this income
  • Dividing lines between those in power and the general population
  • High youth unemployment
  • Excessive weight of the public sector
  • Bureaucratic red tape, weaknesses in the financial sector and problematic business climate

Current Trends

Growth Picks Up in 2018

After a marked slowdown in 2017, the 20% rise in oil prices has enabled the Algerian economy to recover since the beginning of the year. Hydrocarbon export revenues, which represent 93% of exported volumes, increased by 19.5% year-on-year in the first quarter. However, export volumes fell by 3% over the same period, reflecting the lack of investment in the oil sector in recent years. However, higher gas production should offset lower oil production growth. The increase in budgetary expenditure should continue to be the main driver of activity. The complementary finance law presented in May 2018 and which will cover the second half of the year plans an increase in the budgets of several ministries for a total of 4.3 billion dollars. In parallel with the Ministry of Defence, the budgets of the Ministries of Health and the Youth and Sports will be increased by 1 and 10 % respectively. While public investment should remain dynamic (construction of AADL housing, modernization of the port of Annaba), the fall in imports of capital goods reflects a weakening of private investment. The decline in inflation recorded at the beginning of 2018 should remain temporary, as import restrictions are still numerous. The import ban on a list of 877 products benefited the agri-food sector and to a lesser extent the Algerian automobile sector targeted by a boycott campaign against "Made in Algeria" cars. However, input restrictions will continue to penalize industrial production companies that remain dependent on imports. The non-conventional financing introduced in September could, however, lead to an increase in the general price level, which would be reinforced by the introduction of new tariff barriers to replace import bans.

Sizeable Twin Deficits

The Algerian public accounts should benefit from the improvement in the oil market conditions but this should not lead to a contraction in the deficit in 2018. Higher barrel prices are expected to increase tax revenues, but spending is not expected to ease. The Budget bill passed at the end of 2017 reflects a change in the government's budgetary policy, as the budget consolidation plan has been set aside. The complementary financial package covering the second half of 2018 provides for a further increase in spending on some ministries deemed "sensitive" by the authorities. Subsidies and social expenditure should not be abolished with the exception of lower energy costs, which should lead to higher gas and oil prices at the pump. The government deficit is likely to be financed directly by borrowing from the central bank. Public debt is expected to increase accordingly. At the moment, recourse to external debt remains excluded by the public authorities.

Import control measures combined with an increase in export earnings allowed the trade deficit to contract by over 80% year-on-year in the first quarter of 2018. The decrease in import bills is mainly due to a 16% decrease in capital goods and a 12% decrease in non-food consumer goods. Food imports have decreased only slightly. Lower imports of meat and refined sugars subject to the bans were offset by higher than expected grain imports. However, the government plans to replace import bans with new tariff regulations and customs duties ranging from 30 to 200%. Foreign exchange reserves continue to erode but at a slower pace. FDI towards Algeria should nevertheless increase. The government aims to enhance the attractiveness of the oil sector by introducing a new investment law and Sonatrach has signed various agreements to this effect.

Higher Risk of Social Unrest

The May 2017 parliamentary elections, which took place amid the lowest voter turnout ever recorded, returned the governing coalition made up of the FLN and the RND to power. However, government reshuffles have succeeded one another over the past year, the most recent one being the sacking of Abdelmadjid Tebboune in favor of Ahmed Ouyahia, brought back by President Bouteflika Prime Minister for a fourth term as prime minister. Algeria's economic slowdown is starting to have an impact socially, which will prompt the government to continue its generous policy of social transfers to the detriment of fiscal consolidation. Political groups are also preparing for the 2019 presidential election. President Bouteflika in office since 1999 has not yet announced his candidacy but Djamel Ould Abbes, the general secretary of the FLN called in April 2018, President Abdelaziz Boutefas to run for a 5th term.


Coface (07/2018)