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International Monetary Fund. Middle East and Central Asia Dept.

2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Algeria

International Monetary Fund. Middle East and Central Asia Dept.

This Selected Issues paper discusses the need to meet Algeria�s fiscal challenges. Although Algeria enjoys substantial fiscal savings, fiscal policy is currently on an unsustainable path. Under current projections, Algeria will deplete its financial savings in the long term, leaving future generations worse off. To restore fiscal sustainability and ensure intergenerational equity, Algeria will need to undertake significant and sustained fiscal consolidation in the coming years. Successful fiscal consolidation will depend on both mobilizing more revenues and rationalizing expenditures. If done right, fiscal consolidation can restore sustainability while minimizing the impact on economic growth and enhancing equity.

International Monetary Fund. Middle East and Central Asia Dept.

This paper studies the main sources for growth in Algeria within a cross-country analysis and draws policy recommendations to support faster growth. In Section 1, a growth accounting exercise framework has been explained, and in Section 2, the determinants for growth are identified. This study examines the factors behind the recent increase in inflation and the policies that should be implemented to bring inflation back to the level targeted by the monetary authorities. Two approaches used to explore the determinants of inflation were discussed.

International Monetary Fund. Middle East and Central Asia Dept.

The economic condition of Algeria in 2012 is stable. Rising inflation, continued heavy reliance on the hydrocarbon sector and public spending, and vulnerability to a prolonged decline in the oil price, as well as high unemployment pose significant challenges. Explicitly considering an annual cap on drawdowns from the oil fund would strengthen the oil price fiscal rule. The importance of public financial management, shortcomings in the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework, restrictive FDI, and full-fledged budget framework has been stressed. Measures taken for increasing employment have been outlined.

International Monetary Fund. Middle East and Central Asia Dept.

The economic condition of Algeria in 2012 is stable. Rising inflation, continued heavy reliance on the hydrocarbon sector and public spending, and vulnerability to a prolonged decline in the oil price, as well as high unemployment pose significant challenges. Explicitly considering an annual cap on drawdowns from the oil fund would strengthen the oil price fiscal rule. The importance of public financial management, shortcomings in the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) framework, restrictive FDI, and full-fledged budget framework has been stressed. Measures taken for increasing employment have been outlined.

Mr. Paul Cashin, Mr. Kamiar Mohaddes, and Mr. Mehdi Raissi
This paper analyzes spillovers from macroeconomic shocks in systemic economies (China, the Euro Area, and the United States) to the Middle East and North Africa (MENA) region as well as outward spillovers from a GDP shock in the Gulf Cooperation Council (GCC) countries and MENA oil exporters to the rest of the world. This analysis is based on a Global Vector Autoregression (GVAR) model, estimated for 38 countries/regions over the period 1979Q2 to 2011Q2. Spillovers are transmitted across economies via trade, financial, and commodity price linkages. The results show that the MENA countries are more sensitive to developments in China than to shocks in the Euro Area or the United States, in line with the direction of evolving trade patterns and the emergence of China as a key driver of the global economy. Outward spillovers from the GCC region and MENA oil exporters are likely to be stronger in their immediate geographical proximity, but also have global implications.
International Monetary Fund

Despite the effects of the international crisis, real nonhydrocarbon GDP (NHGDP) growth in 2009 exceeded the average of 6 percent. Algeria’s good economic performance supported by the authorities’ prudent fiscal and monetary policies and the favorable external environment are welcomed. The authorities’ policy to maintain the real effective exchange rate close to equilibrium, which is consistent with external stability, is encouraged. Containing government spending would contribute to reducing pressures for real exchange appreciation and potential Dutch disease effects.

International Monetary Fund
Algeria’s external position has strengthened. Algeria’s encouraging economic performances in recent years, reflecting market-oriented reforms and prudent macroeconomic policies in a favorable external environment, are discussed. The main challenges faced by Algeria are to ensure sustained high productivity and nonhydrocarbon growth and to lower further the still-high unemployment. In this context, Executive Directors' welcomed the recent increase in the reserve requirement rate. Gradual steps to reduce exemptions, improve VAT design, and eliminate the turnover tax would contribute importantly to improving the business climate.