Algeria: Algeria Outlook for 2013-17

The country (Algeria) is situated in Northern Africa and bordering the Mediterranean Sea, between Morocco and Tunisia.
it has borders with Western Sahara for 42km, , Morocco for 1559km, Libya for 982km Mali for 1376km, Mauritania for 463km, Niger for 956km and Tunisia for 965km.
The Land in Algeria is usually with high plateau and desert and some mountains, narrow, with discontinuous coastal plain.
The Algerian land covers an area of 2 381 740 km². The climate is arid to semiarid and mild with wet winters and with hot and dry summers along coast. Drier with cold winters and hot summers on high plateau with the sirocco who is a hot, dust/sand-laden wind particularly common in summer. Algerian(s) speak Arabic (official), French, Berber dialects.

OVERVIEW

The third term of the president, Abdelaziz Bouteflika, expires in 2014. There is no clear indication of who his successor will be, but it is likely to be a figure from the political establishment, ensuring a degree of policy continuity. Social unrest will be a preoccupation of the authorities in 2013-17, but we do not expect the government to fall or protests to build critical momentum. The threat from Islamist militants has flared up again following an attack on a natural gas facility, but we do not expect it to pose a danger to in general political stability.

The economy is reliant on hydrocarbons, although the government is carrying out a major investment programme that will seek to diversify the economy and improve infrastructure and skills. We estimate that real GDP increase will average 3.5% a year in 2013­17-below potential-as weak hydrocarbons performance and a lack of private investment hold back the economy. The current account will track movements in oil prices and start to move into a deficit position by 2017. The government\\\'s investment programme will require increased imports of goods and services.

Political outlook

The 2014 presidential election will be the major political event in the estimate period. It is still unclear who will replace Mr Bouteflika, but we expect a consensus and regime-approved candidate to be selected.

Economic policy outlook

Algeria will record fiscal deficits in 2013-17, and fiscal revenue will be vulnerable to changes in the price of oil and gas. The government will keep a watchful eye for misreported payments for imports to try to control the level of capital flowing out of the country.

Economic forecast

We slightly lowered our real GDP increase estimate for 2013 to 3.2% last month as oil production has continued to underwhelm so far in 2013. We are maintaining our estimate this month.

The ratings contained in the present statement and the statement itself were produced outside of the European Union and therefore are not issued by The Economist Intelligence Unit Ltd credit rating agency, which is registered in accordance with Regulation (EC) No 1060/2009 of 16 September 2009, on credit rating agencies, as amended. This statement and rating, therefore, are not issued pursuant to such Regulation and do not fall within its scope.

Outlook for 2013-17

• Abdelaziz Bouteflika\\\'s third term will come to an end in April 2014. Mr Bouteflika suffered a mini-stroke in April, but at present he has no clear successor. A consensus candidate is likely to emerge closer to the election.
• Abdelmalek Sellal, the prime minister, will continue to carry out modest political and economic reforms. Although the changes will be minimal, a critical outbreak of political unrest during the estimate period is not expected.
• Security risk will again be a priority for the government following a hostage crisis at a natural gas facility in January and the potential of a new Islamist militant threat inspired by the unrest in Egypt.
• The fiscal balance will be vulnerable to movements in oil prices. High social spending will mean that it will remain in deficit on average in 2013-17, at around 2% of GDP, which will be covered easily by fiscal reserves.
• Real GDP will grow by 3.2% in 2013 as oil production is held back by concerns over depletion rates. Thereafter, increase will be restrained, at below 4% on average, despite ample public funds to support investment .
• Banque d\\\'Algérie (the central bank) will continue to operate a managed float of the Algerian dinar against the US dollar. The dinar is presently expected to weaken towards the end of the estimate period as oil prices decline.
• Algeria\\\'s external balances will be highly sensitive to movements in oil prices. We expect the current account to move from a surplus of nearly 4% of GDP in 2013 to a small deficit by 2017 as oil prices slide under US$100/barrel.

Review

• The age at which Algerians can begin apprenticeships has been extended to 30 to allow additional young people to enter formal training.
• A Spanish engineering firm has been awarded a arrangement to develop the Touat gasfield in south-eastern Algeria. At the same time as producing, at the end of 2016, the project should have output of 4.7bn cu metres/year.
• Six new power plants are in line to be awarded for development by 2017. The gas-fired plants will have capacity between 1,200 mw and 1,600 mw.
• The Ministry of Finance is taking steps to crack down on what it believes are illicit flows of capital out of the country. The government will empower the customs agency to ensure import values are not misreported.
• The leader of a moderate Islamist opposition party has called for an independent electoral observer ahead of next year\\\'s presidential election.
• Only a few figures have announced their intention to run in the 2014 election so far. However, the establishment has from presently on to coalesce around one candidate.