Economic Analysis - Growth To Slow On New Fiscal Plan - JAN 2018


BMI View: Algerian real GDP growth will slow in 2018 as the economy feels the effect of more aggressive fiscal consolidation from the new government of Prime Minsiter Ahmed Ouyahia. The Ouyahia administration ' s plan to finance the budget shortfall by borrowing directly from the central bank is likely to increase inflationary pressures, which will provide a further headwind to growth.

We expect Algeria's economy to slow in 2018 as the new government of Prime Minister Ahmed Ouyahia ramps up fiscal consolidation measures in a bid to bring down the budget deficit, which surged to 15.4% of GDP in 2015 on the back of lower oil prices. Furthermore, a government plan to finance the shortfall by borrowing from the central bank is likely to lead to inflationary pressures, which will also weigh on economic activity. Against this backdrop, we have decreased our real GDP growth forecast for 2018 to 2.0% from a previous estimate of 2.4%. In 2019, we see growth recovering slightly to 2.4% as rising oil prices and a falling budget shortfall allow the authorities to ease back on the extent of fiscal consolidation.

Oil Prices To Weigh On Government Spending

Fiscal Spending Plan Wil Be A Headwind To Growth
Algeria - GDP
BMI/UN

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