Algeria adapts to changing local and international market conditions

With an area of 2.38m sq km, Algeria became the largest country in Africa when the Republic of South Sudan gained its independence from Sudan in 2011. Located in the Maghreb region of North Africa, it has a Mediterranean coastline of just under 1000 km and land borders with seven countries and territories – Libya, Mali, Mauritania, Morocco, Niger, Tunisia and the Western Sahara – at a combined length of 6734 km. The country is home to numerous mountain ranges, including the Tellian and Saharan Atlas ranges, which run from east to west across the far north and north of the country, respectively, while the Aures mountain range is in the northeast. At 2908 metres, the highest peak is Mount Tahat, located on the Hoggar plateau in the southern wilaya (province) of Tamanrasset.

Topography 

The country’s topography can be roughly divided into three main terrains: a narrow coastal fertile plain to the north of the Tellian Atlas range, where most of the population is concentrated; the Hauts Plateaux, running parallel between the Tellian and Saharan Atlas ranges at an average height of 914 metres; and desert terrain south of the Saharan Atlas, which accounts for most of the country’s territory. The climate is characterised as Mediterranean, with hot, dry summers and cool, wet winters in the coastal plain; a drier climate with similar temperatures in the Hauts Plateaux; and a hot, desert climate in the centre and south of the country. In the capital city of Algiers, August is the hottest month of the year, with temperatures ranging between an average minimum temperature of 22°C and an average maximum of 29°C, while January, the coolest month of the year, sees an average range of 9-15°C. Rainfall levels vary, with December seeing the most, at an average of 137 mm, while August averages nearly zero.

People

As of December 2017, the population numbered 41.6m people, according to UN estimates. This makes it the most populous country in the Maghreb region, ahead of Morocco at 35.9m; and the second most populous in North Africa, behind Egypt at 98.4m. With a population of about 2.6m, the national capital is located on the coast, approximately halfway between the eastern and western borders. Other major cities include the western coastal city of Oran, the north-western city of Tlemcen, the eastern coastal city of Annaba and the north-eastern city of Constantine. The country is administratively divided into 48 wilayas. The most populous province is the wilaya of Algiers, which is home to the capital of the same name, while the largest by area is the southern wilaya of Tamanrasset.

The population is growing at a rate of around 1.8% a year, according to 2016 World Bank figures. Annual growth fell in the 1980s and 1990s, from 3.2% in 1983 to 1.3% in 2002, before rising to 2% in 2012, though now it appears to be on a downward trajectory once again. The population is relatively young, having a median age of 27.8 years and 44.6% of citizens under the age of 25. However, it has been ageing in recent decades, with the proportion of the population under the age of 15 having fallen from 38.7% in 1996 to 29% in 2016. Life expectancy at birth currently stands at 76 years.

Language, Ethnicity & Religion

Around 99% of the population is of Arab-Berber ethnicity, which means that nearly all of the citizenry is descended from Berber or Amazigh populations – the indigenous pre-Islamic peoples of North Africa. The Berber population is primarily concentrated in the north-eastern mountainous region of Kabylie, east of Algiers; although, Berber populations also exist in other parts of the country, such as the Mozabite Berbers of the M’zab Valley in central Algeria, where the city of Ghardaïa is located. Around 15% of the population continues to view their ethnicity as of primarily Berber descent, but most now consider themselves as Arabs and speak Algerian dialects of Arabic as their primary language.

The Arabic language in Algeria is characterised by diglossia: Modern Standard Arabic – the formalised version of Arabic – is used in the news media, formal education and in formal government business, while colloquial local dialects – known collectively in the Maghreb as darija – are used for everyday speech. People often speak one of several Algerian Berber languages as well, though more or less all Algerians can speak Arabic. The instruction and official use of the Berber language, Tamazight, was outlawed for decades. However, the state created a High Commission for Berber Affairs in 1995 and legalised Berber language instruction. In a package of constitutional reforms enacted in 2016, Tamazight was recognised as an official national language alongside Arabic.

As a former colony of France, French is also widely spoken, particularly among the elite, and is used in many print media publications. However, French is not generally used as the primary language of conversation between Algerians, although darija does contain numerous French loan words.

Around 99% of Algerians are Sunni Muslims, largely following the Malikite rite of Sunni Islam, which predominates the Maghreb region, and the constitution declares Islam to be the state religion. Pockets of other non-Sunni Muslim populations also exist, including Ibadi Muslims, mainly among the Mozabite Berber population of the M’zab Valley.

Economy

Algeria’s GDP was worth $156bn in 2016, making it the largest economy in the Maghreb region and the second largest in North Africa, according to World Bank figures. With a per capita GDP of $3843, the country was the wealthiest in North Africa. While this figure was only slightly ahead of Egypt, Morocco and Tunisia, the gap is much larger on a purchasing power parity basis – which takes into account the local cost of basic goods – with Algeria at $15,049 international dollars, ahead of Tunisia, which took second place regionally at $11,598.

Despite these positive results, the economy is currently facing substantial challenges due to the sharp fall in the international price of oil in 2014 and 2015, which has strained public finances. In the years preceding the drop, the authorities had repeatedly raised public sector wages and invested heavily in infrastructure development, but the price drop has since exhausted the country’s oil reserve fund. Reducing public expenditure has therefore become a priority for the government.

The fall in the value of hydrocarbons exports has also led to rapid deterioration in the current account balances, which stood at a deficit of 16.5% of GDP in 2015 and a similar figure in 2016, according to IMF estimates. However, tight control over spending has seen the fiscal deficit decline to less than a projected 5% in 2017 and under 1% by 2019.

Still, the deficit put additional pressure on foreign currency reserves. To address such problems, the authorities are working to diversify the economy away from oil and gas dependency, partly by encouraging the development of the local private sector and manufacturing. Improvement in these areas would both reduce the need for government-backed investment and bring down imports. To encourage this, the state has compelled foreign firms to manufacture goods locally, partly by raising the costs of importing finished manufactured goods.

Natural Resources 

Algeria is a major producer of hydrocarbons, which are crucial contributors to the economy. It has the third-largest proven oil reserves in Africa, behind Libya and Nigeria, with 12.2bn barrels at the end of 2016, according to the “BP Statistical Review of World Energy”.

The country also has the third-highest levels of oil production per day on the continent, behind Nigeria and Angola, with average output at 1.58m barrels per day. In terms of gas, Algeria has the second-largest proven gas reserves in Africa, ranking 10th in the world, with some 159trn cu feet of reserves. It is also the largest actual producer of natural gas in Africa and the ninth-largest internationally, producing 91.3bn cu metres in 2016.

Domestic consumption of both oil and gas has been rising over the last decade, while at the same time oil production has declined, with gas production remaining more or less stable. As a result, the amount of hydrocarbons available for export has been on a gradual downward trend.

Algeria’s sizeable reserves of key minerals, including the third-largest supply of phosphates globally and considerable amounts of iron ore, make it a prime area of investment, especially as these are currently underexploited. Infrastructural challenges associated with the remote desert locations of some key reserves, as well as a historical lack of investment in the state-dominated mining sector are the main culprits, though the authorities are working to step up investment and production in the industry.