Algeria Economy Rocked by Virus Crisis, Falling Oil Revenues

Algeria's capital Algiers during a curfew at the end of June aimed at preventing the spread of COVID-19 | AFP
Algeria's capital Algiers during a curfew at the end of June aimed at preventing the spread of COVID-19 | AFP
TT
20

Algeria Economy Rocked by Virus Crisis, Falling Oil Revenues

Algeria's capital Algiers during a curfew at the end of June aimed at preventing the spread of COVID-19 | AFP
Algeria's capital Algiers during a curfew at the end of June aimed at preventing the spread of COVID-19 | AFP

Currency depreciation, inflation, negative growth, businesses closed: Algeria's economy has been battered by the one-two punch of the coronavirus crisis and tumbling oil revenues.

And unless remedial action is taken on a massive scale, a slide into foreign debt will become inevitable, economists warn.

The National Office of Statistics (ONS) has reported a 3.9 percent fall in Gross Domestic Product (GDP) in the first quarter alone, with unemployment nearing 15 percent -- "alarming" figures, according to Mansour Kedidir, associate professor at the Higher School of Economics in Oran.

Excluding the energy sector, GDP fell by 1.5 percent year-on-year in the 1st quarter, against an increase of 3.6 percent last year compared to Q1 2018.

With confinement measures in place since March 19 to curb the spread of the novel coronavirus, sectors such as services and freight have come to a virtual standstill.

The construction sector, a major provider of jobs, has been paralyzed for months.

Finance Minister Aymen Benabderahmane estimates the losses of state-owned enterprises at nearly one billion euros ($1.17 billion).

Private sector losses have yet to be assessed, but many closed businesses, including restaurants, cafes and travel agencies, risk bankruptcy.

Algeria faces an "unprecedented economic situation", said Prime Minister Abdelaziz Djerad, who has also blamed mismanagement under the rule of ousted longtime president Abdelaziz Bouteflika.

- Recession -

Due to a lack of diversification, the Maghreb region's largest economy is highly dependent on oil revenues and exposed to fluctuations in crude prices.

The International Monetary Fund (IMF) forecast that Algeria's economy will shrink 5.2 percent this year.

Kedidir predicts that unless reforms are brought in, "a Pandora's box will be opened... riots, irredentism, religious extremism".

President Abdelmadjid Tebboune has already ruled out seeking loans from the IMF or other international financial agencies, in the name of "national sovereignty".

Algeria has painful memories of its 1994 recourse to the IMF and a structural adjustment plan that resulted in massive job cuts, shutdowns, and privatizations.

- 'New governance' -

The government is about to launch an economic recovery plan and decided at the start of May to halve the state's operating budget.

A 2020 complementary finance act is based on a decrease in revenues to around 38 billion euros, against the 44 billion euros initially forecast.

Experts say any solution will require drastic reforms.

Kedidir urged authorities to introduce lower interest rates, accounting for the informal sector and tax cuts based on the number of new jobs created.

He called for major projects such as agro-industrial zones in the country's vast desert south, with processing infrastructure, extended railways lines and new towns to service them -- all built with local manpower.

While acknowledging that hydrocarbons will remain the main revenue source for the next 5-10 years, an exit from the economic crisis must be based on new national and decentralized governance, says economist Abderahmane Mebtoul.

Algeria must "bring together all political, economic and social forces... (and) avoid division on secondary issues", he said.

Mebtoul appealed for "a state-citizen symbiosis involving elected officials, companies, banks, universities, and civil society in order to fight against a paralyzing bureaucracy".



Presidential Election: A Crucial First Step toward Saving Lebanon from Economic Crisis

The vacant presidential seat at Baabda Palace after President Michel Aoun's term ended (Reuters)
The vacant presidential seat at Baabda Palace after President Michel Aoun's term ended (Reuters)
TT
20

Presidential Election: A Crucial First Step toward Saving Lebanon from Economic Crisis

The vacant presidential seat at Baabda Palace after President Michel Aoun's term ended (Reuters)
The vacant presidential seat at Baabda Palace after President Michel Aoun's term ended (Reuters)

Since 2019, Lebanon has faced one of its worst economic crises in modern history, affecting all aspects of life. The local currency has lost over 95% of its value, driving inflation to record levels and making goods and services unaffordable. Poverty and unemployment have surged.
Amid this, political divisions have paralyzed government action, preventing any effective response to the crisis.
The recent war with Israel added to the burden, causing huge human and material losses estimated by the World Bank at $8.5 billion. This has made Lebanon’s economic and social struggles even harder to resolve, with no president in place to lead the country.
The presidential post in Lebanon has been vacant since President Michel Aoun's term ended in October 2022, leaving the country without a leader to address growing economic and financial issues.
This vacancy has stalled government formation, making it difficult for Lebanon to negotiate with international donors like the International Monetary Fund (IMF), which demands major reforms in exchange for aid.
Choosing a new president is now a critical priority, not only to regain local and international confidence but also to begin the long-needed reforms.
One major challenge the new president will face is the reconstruction effort, which is estimated to cost over $6 billion. This is a huge financial burden that will require significant resources and effort to secure funding.
Reconstruction in Lebanon is not just about fixing infrastructure or repairing damage; it is a key test of the country’s ability to restore its role on the regional and international arena.
To achieve this, Lebanon needs a president with a clear vision and strong international connections, able to engage effectively with donor countries and major financial institutions.
Without credible and unified political leadership, Lebanon’s chances of gaining external support will remain limited, especially as international trust has been shaken by years of mismanagement and lack of reforms.
Keeping Lebanon’s deepening crises in mind, the people are hoping that electing a new president will offer a chance for economic and political recovery.
The new president, along with a strong government, is expected to rebuild trust both locally and internationally and restore political stability—key factors for stopping the economic decline and encouraging growth.
For instance, reviving Lebanon’s vital tourism sector will require better security and restoring confidence in the country as a safe place for investment.
This can only happen with political leadership that has a clear plan for reconstruction and necessary reforms.
Given Lebanon’s ongoing financial struggles, the new president’s ability to address these challenges will be critical to rescuing the country and guiding the economy toward recovery and sustainable growth.