Algeria’s Growth at a Crossroads: World Bank Urges Productivity Push for Sustainable Future
Written By Maxine Ansah
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Algeria’s economy continues to chart a positive course, with strong non-hydrocarbon growth and easing inflation recorded in 2024. However, the latest Spring 2025 World Bank Economic Update warns that without urgent structural reforms to enhance productivity and diversify the economy, the country risks increased vulnerability to external shocks, particularly fluctuations in oil and gas prices.
The report highlights a 4.8 percent expansion in non-hydrocarbon Gross Domestic Product (GDP) last year. This growth was fuelled by solid public investment and robust household consumption. Inflation also eased significantly to 4.0 percent, helped by a surprisingly strong agricultural performance despite limited rainfall. This contributed to a notable slowdown in food price increases, providing relief to Algerian households.
Yet challenges persist. Overall real GDP growth is projected to moderate to 3.3 percent in 2025. While a recovery in extractive industries is anticipated, consolidation in public investment could limit momentum. More concerning is the widening of fiscal and current account deficits, which were driven by a contraction in hydrocarbon output and a surge in imports. Foreign exchange reserves have also declined, raising alarms about Algeria’s external position.
“Algeria’s growth path continues to be solid. However, the fiscal and external balance remain highly sensitive to oil and gas prices,” said Kamel Braham, World Bank Resident Representative for Algeria. “Accelerating structural transformation is essential to build resilience and support sustainable growth.”
The World Bank underscores the urgency of enhancing productivity across the economy. In particular, the report identifies manufacturing and services as sectors with high potential to generate value-added employment and reduce reliance on hydrocarbons and state-led investment.
“Productivity gains, particularly in manufacturing and services, are essential to unlock Algeria’s growth potential,” noted Cyril Desponts, Senior Economist for Algeria. “A shift toward higher-value-added sectors, supported by a progressive fiscal rebalancing, targeted reforms to boost private investment, and a skill development strategy, will be key to building a more resilient economy.”
The report lays out several policy priorities to support long-term growth. These include strengthening the macroeconomic policy framework, improving economic governance, and making strategic investments in human capital. It also highlights the importance of promoting foreign investment as a means to encourage the transfer of technologies and modern management practices. These measures are critical if Algeria is to move beyond middle-income status and secure a more prosperous and stable economic future.
Algeria has made commendable progress in recent years. Yet the current economic model, heavily reliant on public spending and hydrocarbon exports, faces mounting pressure. As the global economy becomes more uncertain and as energy markets evolve, the need for deep and sustained reform becomes increasingly urgent.
The World Bank’s message is clear. Now is the time for Algeria to invest in its people, improve productivity, and prepare the economy for a future in which resilience and diversification are no longer options but necessities.
