The World Bank’s 9 October report on Algeria expects the current political crisis to slow economic growth in both the hydrocarbon and non-hydrocarbon sectors. It now foresees GDP growth being reduced to 1.3% in 2019 compared to 1.5% last year.

The arrest and imprisonment of so many business leaders for corruption has disrupted the economy because of sudden changes in the management and supervision of these companies, as well as uncertainty about investment. The bank sees the political uncertainty dampening hope of increased oil production because the revision of the oil tax law will inevitably be delayed. 

The World Bank also sees the current period before the enforced 12 December will further delay the fiscal consolidation process, increase the budget deficit to 12.1% of GDP, and risk a more abrupt adjustment in the future.

Moreover — because the political events are expected to have an impact on economic activity — the World Bank expects that more resources will inevitably have to be allocated to social measures at the expense of public investment spending.

If the latest report from the Association générale des entrepreneurs algériens (AGEA) is anything to go by, however, the situation could be even worse than the World Banks’ estimates. The AGEA’s president, Mouloud Khaloufi, has said on national radio that more than 60% of companies in the construction sector had ceased activity. He said that 1360 construction companies and developers had ceased operations and that all building material manufacturers are virtually shut down. 

He claimed that the government had ignored all of the AGEA’s warnings and that even construction manufacturing companies are now shutting down. He also queried the government’s claim that it had built four million homes. The whole world is laughing at us he said and that only 1.5-2.0 million homes have been built since the massive Boumerdès earthquake in 2003.

This excerpt is taken from Algeria Politics & Security, our weekly intelligence report on Algeria. Click here to receive a free sample copy.