Drop in Oil Prices Unveils Vulnerability of Algerian Economy

Algerian authorities have finally been compelled to face the reality and admit the failure of their economic model based on crude oil exports and trade.
Global oil prices have fallen sharply over the past years, leading to significant revenue shortfalls in many energy exporting nations, including Algeria, member of the OPEC.
The falling prices of oil have unveiled the weakness of the Algerian economy. So, the decision-makers and the government of this North African country have been urged to build a non-oil economy, based on agriculture and industry like thriving neighboring country Morocco.
The Algerian 2030 vision for economic development calls for economic diversification to reduce its dependency on hydrocarbons. But this goal will be hard to achieve due to bureaucracy, widespread corruption and political instability in this authoritarian country.
In all sectors of public service (electricity, gas, water, rail transport, telecommunications), tariffs are subsidized for social considerations but this financial support is no longer possible as shown by 2017 appropriation bill
Cuts to public spending, raised revenue through VAT and taxes on electricity, fuel and tobacco in the 2017 Finance Bill triggered unrest earlier this year when rioters in the eastern city of Bejaia clashed with police.
European commissioner Miguel Arias Canete has called lately on Algeria to improve the regulatory framework for investments, expressing concern for the security situation in this country.
Algeria’s regime has so far escaped the revolts that overturned other governments in the Arab world thanks to social handouts. It has held off unrest by redistributing the country’s substantial oil revenues, but this tactic is no longer working.
If left unaddressed, the social, economic, and political grievances festering beneath the surface in Algeria could rapidly escalate into popular revolts that threaten the country’s stability and the whole region.
According to some experts, the Algerian government must engage political reform or face the possibility of collapse as the number of the disgruntled and the unemployed is soaring, edging explosive situation.

Khalid Al Mouahidi Posted by on April 14, 2017. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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