Algeria’s growth slows despite energy sector surge

Non-hydrocarbon expansion decline pulls down overall GDP in the third-quarter last year and government has approved bigger cut in spending this year.

A traffic jam in Algiers, Algeria. Despite an uptick in its energy sector, GDP for the country has slowed. Anis Belghoul / AP

Algeria recorded slower third-quarter growth last year despite a significantly better performance from the energy sector, as non-hydrocarbon growth slackened, the government said on Sunday.

Overall GDP growth was 3 per cent in the third quarter, down from 3.5 per cent in the same period of 2015, according to a report from the statistics office. The government expects full-year growth to reach 3.5 per cent, compared with 3.9 per cent in 2015.

The Opec member country’s energy sector expanded by 7.7 per cent in the third quarter, due to a higher output in 2016 and a slight recovery in prices. The oil sector contracted 1.4 per cent in the same period in 2015 with oil prices plummeting.

Algeria relies heavily on oil and gas, which make up 60 per cent of the state budget and 95 per cent of total exports.

Like in other oil producing economies, low crude prices have hit Algeria’s state finances, forcing the government to cut spending and freeze infrastructure investment projects.

The government has approved a 14 per cent cut in spending for 2017 after a 9 per cent reduction for 2016. Energy revenues are forecast at US$35 billion for this year, up from $27.5bn in 2016.

It has also endorsed new and higher taxes as part of efforts to secure new revenue sources after attempts to diversify the economy away from oil and gas failed.

Growth in the non-hydrocarbon sector had been prompting the north African country of 40 million people to import almost everything from food and medicine to raw materials needed for its small industry.

But non-energy growth weakened across the board in the third quarter, with an overall 2.3 per cent growth, down from 5.4 per cent in the same period in 2015, the statistics office said.

The agriculture sector grew 4.7 per cent, down from 7.2 per cent a year earlier, while services expanded 3.9 per cent against 5 per cent in 2015.

Industrial growth was 2.8 per cent, down from 4.5 per cent a year ago.

* Reuters

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