Algeria

Politics:

• Analysis

  Algeria politics: Quick View - Opposition leaders call on Bouteflika to res

  Event

  The leaders of several of Algeria's opposition parties have called on the president, Abdelaziz Bouteflika, to resign.

  Analysis

  Calling themselves the "group of eleven", Algerian opposition figures, including the leader of the Mouvement de la societe pour la paix (MSP, a leading Islamist party), called on Mr Bouteflika to step down for allowing France to use Algeria's airspace to conduct its military intervention in neighbouring Mali. The head of the Organisation for the defence of memory and sovereignty, a political campaign group, said that Mr Bouteflika's decision to let France intervene via Algeria showed that the president "was not concerned" with the citizens of the country he governed.

  The rationale for the call for Mr Bouteflika's resignation may appear surprising to outside observers. Rather than suggesting the military's assault on the seized In Amenas natural gas facility (in which nearly 70 people are confirmed to have been killed) would warrant the resignation of the president, the opposition groups focused on what they felt was a violation of Algeria's sovereignty. Given its history as a French colonial territory, Algeria is acutely sensitive to any foreign intervention in the Sahara or Sahel region, which it feels forms part of its strategic backyard. Bougerra Soltani, the outgoing head of the MSP and erstwhile ally of the president, said that Algeria needed to create a "wall" to insulate the country from the effects of foreign excursions in the region that could affect Algeria's sovereignty. In the view of these opposition figures, the attack on In Amenas was a direct result of France's incursion in Mali.

  However, the "group of eleven" was quick to distinguish the separate poles of authority in Algeria, and applauded the role of the Algerian military in dealing with the hostage crisis. The opposition's claim that the army was being used by the civil authorities to "clean up their mistakes" may be an attempt to curry favour among Algeria's powerful military and security establishment with the aim of perhaps receiving some unofficial backing for a candidate from the group ahead of the 2014 presidential election.

  January 25, 2013

• Background

  Algeria: Political forces at a glance

  Political outlook: Political forces at a glance

  Present government: A military-backed, coalition government over which the president, Abdelaziz Bouteflika, wields considerable influence. Mr Bouteflika was re-elected for a third term in 2009. His powers were enhanced by constitutional amendments passed in November 2008, which also abolished the previous two-term limit on the presidency. The role of senior military officers in Algerian political life is no longer all-pervasive, but remains significant. The Front de libération nationale (FLN) dominates the cabinet and parliament. In May 2012, it won nearly 48% of the seats in parliament, significantly enhancing its presence in the legislature. The other main regime party, the Rassemblement national démocratique (RND), was created by the military in 1997 as an alternative to the FLN, but remains very much part of the establishment.

  Parliamentary forces: The FLN won a considerable victory in the election in May 2012 for the Assemblée populaire nationale (Algeria's lower house of parliament), taking 221 of the 462 seats available. The RND won 70 seats, meaning that if the FLN and RND continue their pre-poll coalition they will hold a significant majority in parliament. The Mouvement de la société pour la paix, an Islamist party analogous to the Muslim Brotherhood in other Arab states, left the ruling coalition in January 2012 ostensibly over what it believed was the government's lack of commitment to reform. It formed an alliance with other Islamist groups but returned only 47 seats, less than it had received on its own in the 2007 poll. The May 2012 election was characterised by a range of new parties that had been constituted following the government's liberalisation of the political parties law. However, many of the new parties had little time to organise effectively or make the population aware of their positions, helping the establishment parties win a significant share of seats. The opposition parties in parliament reflect a variety of political beliefs, including socialists, Islamists and conservative nationalists. The government will probably be able to make short-term alliances with individual groups in parliament to pass legislation, but this will only be necessary to add a veneer of credibility as the FLN and RND together hold nearly 63% of seats in parliament.

  Algeria parliamentary election results
  	Number of	% of ballots	Number of
  Party	votes	cast	seats won	% of seats
  Front de libération nationale	1,324,363	14.18	221	47.84
  Rassemblement national démocratique	524,057	5.61	70	15.15
  Alliance de Algérie verte a	475,049	5.09	47	10.17
  Front des forces socialistes	188,275	2.02	21	4.55
  Indépendants	671,190	7.19	19	4.11
  Parti des travailleurs	283,585	3.04	17	3.68
  Front national algérien	198,544	2.13	9	1.95
  Front pour la justice et le développement	232,676	2.49	7	1.52
  Mouvement populaire algérien	165,600	1.77	6	1.30
  Parti el-Fedjr el-Jadid	132,492	1.42	5	1.08
  Parti national pour la solidarité et le développement	114,372	1.22	4	0.87
  Front du changement	173,981	1.86	4	0.87
  AHD 54	120,201	1.29	3	0.65
  Alliance nationale républicaine	109,331	1.17	3	0.65
  Front national pour la justice sociale	140,223	1.50	3	0.65
  Union des forces démocratiques et sociales	114,481	1.23	3	0.65
  Rassemblement algérien	117,549	1.26	2	0.43
  Rassemblement patriotique républicain	114,651	1.23	2	0.43
  Mouvement national d'espérance	119,253	1.28	2	0.43
  Front el-Moustakbel	174,708	1.87	2	0.43
  Parti el-Karama	129,427	1.39	2	0.43
  Mouvement des citoyens libres	115,631	1.24	2	0.43
  Parti des jeunes	102,663	1.10	2	0.43
  Parti Ennour el-Djazairi	48,943	0.52	2	0.43
  Parti du renouveau algérien	111,218	1.19	1	0.22
  Front national démocratique	101,643	1.09	1	0.22
  Front national des indépendants pour la concorde	107,833	1.15	1	0.22
  Mouvement el-Infitah	116,384	1.25	1	0.22
  Total	6,328,323	67.76	462	100.00
  Total including votes for parties that did not return a candidate	9,339,026	100.00	462	100.00
  a Composed of Mouvement de la société pour la paix, El Islah and Ennahda.
  Source: Conseil constitutionnel.

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  Next elections: May 2017 (legislative); April 2014 (presidential).

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  June 27, 2012

• Structure

  Algeria: Political structure

  Official name

  People's Democratic Republic of Algeria

  Legal system

  Based on the constitution of 1976, revised in 1989 and 1997

  Legislature

  Bicameral: the lower house, the Assemblée populaire nationale, with 462 members, was first elected in June 1997; the upper house, the Conseil de la nation, which has 144 seats, was formed in December 1997, with two-thirds of its members elected through municipal polls and the remainder appointed by the president

  National elections

  May 10th 2012 (legislative); April 9th 2009 (presidential); November 27th 2007 (provincial and municipal councils); next presidential election due in April 2014

  Head of state

  President, currently Abdelaziz Bouteflika, elected for a third term on April 9th 2009; Mr Bouteflika is also defence minister

  Executive

  Council of Ministers presided over by the prime minister, who is appointed by the head of state. A new government was appointed in September 2012

  Main political parties

  Front de libération nationale (FLN), previously the sole legal party; Rassemblement national démocratique (RND); Front des forces socialistes (FFS); Rassemblement pour la culture et la démocratie (RCD); Mouvement de la réforme nationale (El Islah, Islamist); Mouvement de la société pour la paix (MSP; Islamist); Parti des travailleurs (Labour Party)

  The government

  Prime minister: Abdelmalek Sellal

  Minister delegate at the Ministry of Defence: Abdelmalek Gueneiza

  Key ministers

  Agriculture: Rachid Benaissa

  Defence: Abdelaziz Bouteflika

  Energy & mining: Youcef Yousfi

  Environment, territorial planning & towns: Amara Benyounes

  Finance: Karim Djoudi

  Foreign affairs (minister of state): Mourad Medelci

  Health & population: Abdelaziz Ziari

  Housing: Abdelmadjid Tebboune

  Industry, small- & medium-sized enterprises & investment promotion: Cherif Rahmani

  Interior & local government: Dahou Ould Kablia

  Justice: Mohammed Charfi

  Labour & social security: Tayeb Louh

  National education: Abdelatif Baba Ahmed

  National solidarity: Souad Bendjaballah

  Parliamentary affairs: Mahmoud Khedri

  Post & information & communications technology: Moussa Benhamadi

  Prospective planning & statistics: Bachir Messaitfa

  Public works: Amar Ghoul

  Trade: Mustapha Benbada

  Transport: Amar Tou

  Water resources: Mohammed Necib

  Central bank governor

  Mohammed Laksaci

  March 06, 2013

• Outlook

  Algeria: Key developments

  Outlook for 2013-17

  • Abdelaziz Bouteflika's third term will come to an end in 2014. There is no clear successor to the 75-year-old president (who is unlikely to run again), but establishment figures are positioning themselves as potential candidates.
  • Abdelmalek Sellal, the prime minister, will continue to carry out modest political and economic reforms. Although the changes will be minimal, we do not expect a serious outbreak of political unrest during the forecast period.
  • Security risk will again be a priority for the government following a hostage crisis at a natural gas facility in January. The threat of terrorism will deter some foreign investors from taking on projects in Algeria.
  • The government will try to consolidate spending as it grows concerned about the fiscal balance's vulnerability to oil price movements, and will record near-balanced budgets on average in the forecast period.
  • GDP is forecast to grow by 3.5% in real terms in 2013 as investment is depressed owing to security concerns and hydrocarbons supply is disrupted. Growth will average 3.5% a year in 2014-17 as government investment continues.
  • Banque d'Algérie (the central bank) will continue to operate a managed float of the Algerian dinar against the US dollar. It will manage the value of the currency in line with a policy of curbing demand for imports.
  • Energy exports will continue to dominate the external account. We expect Algeria to record current-account surpluses in 2013-17, averaging around 5% of GDP a year as oil prices remain elevated.

  Review

  • Algeria has continued to reel from the effects of a terrorist attack on the In Amenas natural gas facility in January. Sonatrach, Algeria's state-run oil and gas firm, said that the facility was operating at one-third of its capacity by end-February.
  • Inflation averaged 8.9% in 2012, its highest level since the civil war of the 1990s. Despite its attempts to soak up excess liquidity in the market, the government was unable to control the effect of high food prices and increased wages for civil servants.
  • Eni, an Italian oil and gas firm, began production at the Menzel Ledjmet Est gasfield, which has a capacity of 9m cu metres/day of gas and 15,000 barrels/day of oil and condensates. Output from the field will help Algeria meet growing domestic demand for fuel.
  • Trade data for 2012 showed another strong trade surplus, with imports slipping by around 1%. Exports remain heavily skewed towards oil and the EU, however.

  March 06, 2013

Economy:

• Background

  Algeria: Country fact sheet

  Fact sheet

  Annual data	2012a	Historical averages (%)	2008-12
  Population (m)	37.1	Population growth	1.6
  GDP (US$ bn; market exchange rate)	212.4	Real GDP growth	2.6
  GDP (US$ bn; purchasing power parity)	320.0b	Real domestic demand growth	6.1
  GDP per head (US$; market exchange rate)	5,726	Inflation	5.9
  GDP per head (US$; purchasing power parity)	8,626b	Current-account balance (% of GDP)	8.8
  Exchange rate (av) AD:US$	77.5c	FDI inflows (% of GDP)	1.5
  a The Economist Intelligence Unit estimates. b Economist Intelligence Unit estimates. c Actual.

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  Background: Algeria gained independence from France in 1962 after one of Africa's bloodiest anti-colonial wars. The hydrocarbons industry was nationalised in 1971. In the late 1980s, after two decades of central planning, some economic and political liberalisation began to be introduced. For most of the 1990s the country suffered from intense violence and economic difficulties. Reforms advanced in the first presidential term of Abdelaziz Bouteflika, but the momentum slowed in his second and third terms. Limited liberalisation and economic reform may resume in the latter part of the forecast period.

  Political structure: After independence, Algeria was a single-party socialist state, ruled by the Front de libération nationale. In the late 1980s a series of political and economic reforms began, creating the opportunity for the now banned Front islamique du salut to win control of the legislature in the December 1991 election. However, the army stepped in to annul the election, starting a decade of severe political and economic difficulties. By the end of the decade, the situation had begun to improve. The influence of the military over political affairs has declined as Mr Bouteflika, who became president in 1999, has increased the power of the presidency. Social unrest in 2011 led to a modest round of political liberalisation, including ending the state of emergency and approving a range of new political parties, including Islamist ones.

  Policy issues: The government will continue to use public investment to achieve its aims of creating jobs, improving the provision of housing and utilities and developing non-hydrocarbons industry and the services sector. Actual capital spending has increased significantly over the past few years, and the government plans to maintain this momentum through implementing a new five-year US$286bn development programme. The government believes it has sufficient funds saved from earlier large budget surpluses to sustain this expansionary medium-term fiscal policy, although the longevity of these funds will remain contingent on high oil and gas prices.

  Taxation: The tax regime is gradually being reformed in a bid to increase flexibility and transparency and to simplify the system. Foreign investors benefit from tax incentives, including five-year tax relief for companies investing in new projects, but since the beginning of 2009 have had to reinvest these benefits and pay a 15% tax on repatriated profits.

  Foreign trade: Sharp rises in crude oil prices have pushed up total export earnings in recent years. At an estimated US$73bn in 2012 they were 0.8% higher than in 2011. Algeria's exports are principally made up of oil to the US and gas to the EU, whereas most of its imports come from the EU, a pattern that will persist during the forecast period.

  Major exports 2011	% of total	Major imports 2011	% of total
  Hydrocarbons	98.0	Capital goods	33.9
  Semi-finished goods	2.1	Semi-finished goods	22.6
  Raw materials	0.2	Food	20.8
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  US	18.6	France	18.6
  Italy	9.7	China	10.4
  Canada	7.6	Italy	9.5

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  March 06, 2013

• Structure

  Algeria: Economic structure

  Data and charts: Annual trends charts

  
  

  

  March 06, 2013

• Outlook

  Algeria: Country outlook

  Algeria: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The Economist Intelligence Unit expects the political scene to remain relatively stable in 2013-17. A powerful security-military establishment (le pouvoir), a recent history of brutal civil violence and some modest political liberalisation mean that Algeria should avoid the revolutionary upheavals seen in other Arab countries, despite simmering discontent over economic and political conditions. The president, Abdelaziz Bouteflika, has been in power since 1999, and his current, third mandate--secured after constitutional amendments lifted the two-term limit for presidents--runs until 2014. It is as yet unclear who will assume the leadership after Mr Bouteflika's current term expires, or even whether the 75-year-old president will be healthy enough to complete his term. There will be some jockeying for position among the leaders of Algeria's political scene as potential candidates attempt to build up a support base, but, at present, we expect the transition to a new leadership to be relatively smooth. It is unlikely that any successor would depart radically from Mr Bouteflika's policy of slow and modest political and economic reform. A terrorist attack on a natural gas facility in mid-January will raise concerns about security and lead to a strengthening of the role of the military.

  ELECTION WATCH: The Front de libération nationale (FLN) won the largest number of seats in the parliamentary election held in May 2012 and controls nearly half of the seats in the Assemblée populaire nationale (the lower house) on its own. The performance of the FLN raised questions about the legitimacy of the poll, as many new parties (including Islamist ones) created before the election were expected to do well. Parliament has little impact on policymaking, however, and will continue to act as a body to approve presidential decrees and decisions by the executive.

  INTERNATIONAL RELATIONS: Algeria will be preoccupied with the dissolution of central government authority in neighbouring Mali, and will try to avoid becoming directly involved in an international intervention against militants operating in the north of that country for fear of prompting further attacks within its own territory. The government has allowed France to use its airspace to conduct military operations. Nevertheless, maintaining a constructive relationship with the EU will be a priority, as the region is a major consumer of Algerian gas exports, provided through long-term contracts. Algerian-US relations will continue to be focused on dealing with militant Islamism and on US interest in the oil sector.

  POLICY TRENDS: Despite some consolidation of spending, the government will continue to dominate the economy through investment and by maintaining high current spending on wages and subsidies in an attempt to prevent social unrest. Expanding the housing stock and creating jobs will be a priority for the government of Abdelmalek Sellal, the prime minister. Restrictions on foreign investment, including a tough tax regime and a limit of 49% on foreign ownership, and policies to reduce imports will be used to protect Algeria's national economic interests and promote domestic industry, but these could be relaxed during the forecast period to encourage foreign businesses to set up locally, with their production replacing some imports.

  ECONOMIC GROWTH: We expect Algeria's economy to grow by 3.5% in real terms in 2013 as the effect of the In Amenas attack damages investment sentiment, both local and foreign, and disrupts the supply of natural gas for longer than initially anticipated. Throughout the forecast period, real GDP growth rates in Algeria will remain modest despite the country's large and easily accessible hydrocarbons resources and the government's ample financing capabilities. The government will continue to account for a large share of the economy as it spends on infrastructure and skills in an effort to diversify away from a reliance on hydrocarbons (which accounted for 36.7% of GDP in 2011). The expansion of the civil service and increases in public-sector wages will provide a base for private consumption, but price pressures and restrictions on credit will limit their impact. Private investment growth will be constrained by a lack of financing (from both the banks and the capital markets) and ongoing uncertainty over whether Algeria will, like its regional peers, experience mass protests, now compounded by the attack on a hydrocarbons facility (unprecedented in its history). Infrastructure projects (expanding the housing stock and road and rail construction) are under way, but are often subject to delays, despite the availability of state funding. The economy will grow by an annual average of 3.5% in 2014-17, supported by government investment and modest increases in hydrocarbons production.

  INFLATION: We expect inflation to ease to an average of 3.5% in 2013 owing to a high base effect from 2012 and easing food prices. Inflation averaged 8.9% in 2012, as sharp rises in food prices were exacerbated by internal bottlenecks. Inflation will begin to creep up towards the end of the forecast period as global food prices increase and industrial material prices continue to rise. Algeria is a major importer of agricultural products, leaving it vulnerable to shifts in international prices. Moreover, the import sector is heavily restricted, which creates bottlenecks and can lead to price spikes. The government has also increased wages for public-sector workers in nearly all sectors to stem the rise of unrest in the country.

  EXCHANGE RATES: The Banque d'Algérie (BdA, the central bank) will manage the float of the Algerian dinar with the aim of meeting government policy goals, such as reducing the cost of imports to make a host of foreign capital inputs more affordable or, at other times, trying to limit demand for imports. We expect a modest appreciation over the course of the forecast period as the government will rely on foreign capital inputs to meet infrastructure investment needs, with the dinar strengthening from around AD76:US$1 in 2013 to around AD70.5:US$1 in 2017. The central bank has large foreign-exchange reserves, estimated at around US$190bn at end-2012, which would enable it to counter any serious downward pressure on the dinar, should it occur.

  EXTERNAL SECTOR: The current account will reflect movements in international oil prices. Hydrocarbons dominate the trade balance, accounting for over 97% of exports in 2012. This dependency on oil and gas leaves Algeria vulnerable to both price shifts and changing patterns of consumption. The expected weak euro zone performance in 2013 will dampen demand for Algerian hydrocarbons, as will increased use by the US of domestic oil production. Additional liquefied natural gas trains are set to come on line in 2013-14, but at present existing pipelines to Europe are running far below capacity, indicating a lack of demand. These are structural concerns for Algeria's external account, and the government will support export-oriented diversification. We expect Algeria to record trade surpluses averaging US$30.3bn in 2013-17. Remittances will remain an important non-merchandise inflow, but will be dwarfed by non-merchandise outflows. Profit repatriation, largely associated with the energy sector, will be the main debit on the income account, ensuring it remains in deficit despite earnings from Algeria's massive foreign assets (official and unofficial). We forecast that the current-account surplus will reach 5.4% of GDP in 2013 and average around 5.2% of GDP over the remainder of the forecast period.

  March 11, 2013

• Forecast

  Algeria: Country forecast summary

  Country forecast overview: Highlights

  • The Economist Intelligence Unit expects Algeria largely to avoid the political and social unrest that has spread across the Middle East and North Africa. A degree of political participation and some piecemeal reforms should prevent serious pressures building on the regime.
  • Uncertainty over the presidential succession will rise because of the age and ill-health of the president, Abdelaziz Bouteflika. A consensus candidate agreed on by the military and leading political parties is likely to emerge before the 2014 election, and policy is unlikely to change much.
  • The government of the prime minister, Abdelmalek Sellal, will continue to implement modest political reforms, but will stop short of a full political opening. The military will increase its influence on policymaking following a terrorist attack on a natural gas facility.
  • Foreign companies will continue to find the operating environment difficult in the near term as the government maintains restrictive rules on imports and on foreign investment and ownership. Oil and gas will receive preferential treatment, such as the recent relaxation of the hydrocarbons law, but security and regulatory risks will deter all but the most resilient of investors.
  • Heavy exposure to the economic troubles of the euro zone and a reliance on hydrocarbons as its single major export present structural risks for Algeria's economy. The government will take steps to diversify the economy, including supporting the domestic private sector, but the state will remain the single-largest economic actor.
  • The need for economic reform remains strong, as Algeria's dilapidated infrastructure, obsolete industrial complexes and underperforming educational system all need upgrading. The government will carry out spending plans aimed at improving transport, education, housing, utilities and water management.
  • The government will try to consolidate spending over the forecast period, as vulnerability to oil prices remains a risk for the budget balance. We expect Algeria to record a near-balanced fiscal position on average in 2013-17.
  • Real GDP growth is forecast to average 3.5% in 2013-17, but we believe that this is well below potential. Lagging investment in the hydrocarbons sector means that Algeria's oil and gas output will be below potential for much of the forecast period. However, still-high prices for oil and restrictions on imports will buoy growth.

  

  March 06, 2013

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Country Briefing

Land area

2,381,741 sq km

Population

37.1m (January 1st 2012; Office national des statistiques estimate)

Main towns

Population of main urban areas in '000s (mid-2006 Economist Intelligence Unit estimates)

Greater Algiers (incl capital): 4,825

Oran: 1,150

Constantine: 810

Annaba: 580

Climate

Temperate on the coast, hot and dry in the south

Weather in Algiers (altitude 59 metres)

Hottest month, August, 22-29°C; coldest month, January, 9-15°C (average daily minimum and maximum); driest month, July, 1 mm average rainfall; wettest month, December, 140 mm average rainfall

Language

Arabic (official); Berber language (Tamazight) and French are also used

Measures

Metric system

Currency

Algerian dinar (AD) = 100 centimes or 20 douros

Time

GMT in the winter months; GMT plus one hour in the summer

Public holidays

All Muslim holidays are observed in accordance with the lunar calendar, and the dates are therefore approximate: Prophet's birthday (February 4th 2012) Eid al-Fitr (August 19th); Eid al-Adha (November 6th); Islamic New Year (November 15th). Other public holidays: New Year's Day (January 1st); Labour Day (May 1st); Independence Day (July 5th); Anniversary of the Revolution (November 1st)

January 01, 2013