Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax System
Basic data
Algeria’s economy is expected to grow by 2.9% in 2022, with unemployment down to 15%, due to higher revenues from oil and gas. Inflation should continue to rise significantly, from 6.6% in 2021 to 10.9% in 2022. However, the structural problem of the Algerian economy lies in its dependence on imports, which in 2019 accounted for 24.3% of GDP despite numerous restrictive measures measures, but also on revenues from the sale of oil and gas with significant fluctuations. The drop in oil revenues in 2020 widened the current account deficit from 10% of GDP to 14.9% of GDP. Due to the high fiscal deficit, and without alternative sources to balance it, the Algerian government, in the spirit of rentier policy, has essentially exhausted its reserves of foreign exchange by 2021. Increase in oil and gas prices from 2. half of 2021 entails an increase in funds on the foreign exchange account compared to the previous period. Despite the increase in oil prices on the global markets and with the maintenance of protectionist measures, ADLR’s indebtedness is high, and prices of up to USD 160 per barrel of oil would be needed to balance the state budget. New administrative and bureaucratic regulations restricting the work of importers, a system of super tariffs, as well as a system of quotas and licenses will continue to dominate the foreign trade policy of the ADLR, from 2021 the strong opposition to imports is even more intensified. ADLR has imported an average of $30 billion in goods over the past 20 years, compared to exports of $42 billion. Traditionally, industrial products (machines and CKD/SKD machine parts) and semi-finished products intended for on-site assembly (electronics, household appliances) account for the largest share of imports. Check ebizdir for economical facts of Algeria.
The development of the GDP structure in the last 20 years shows the strong dominance of the oil and gas industry with a deep decline in the years 2014-2021, in the 2nd place GDP is trade, and since 2017 the percentage representation of agriculture/food has been constantly increasing (Soummam, Cevital, Rouiba, Ifri, etc.). Industrial production, which is supposed to be at the birth of a diversified economy, is only fifth in the order. ADLR suffers from the so-called Dutch disease, where dependence on oil and gas leads to a fatal inability to use human and material resources. Now the electronic and electrotechnical industry is mainly developing, where high requirements are set for integration on site (70% already in the first year of production), e.g. Benhamadi, or Bomare Company – an important contract for the assembly of LG products with deliveries to Spain. The metallurgical industry is dominated by the largest plant in Africa, El-Hadjar (Annaba), then Bellar (Jijel), Tosyali factory (Oran). The production of building materials is based on the state enterprise GICA, then Lafarge Holcim. Over 90% of all income comes from the energy sector, which is dominated by the state-owned companies Sonatrach and Sonelgaz. Other export items can be searched atAlgerian-Export.
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | 0.8 | -8.5 | 3.9 | 2.9 | 1.2 |
| GDP/population (USD/PPP) | 11,917.30 | 11,210.00 | 11,790.00 | 12,390.00 | 12,600.0 |
| Inflation (%) | 2.4 | 2.1 | 6.6 | 10.9 | 8 |
| Unemployment (%) | 11.6 | 16 | 16.9 | 15 | 15.2 |
| Export of goods (billion USD) | 35 | 21.1 | 36.6 | 44.8 | 41.2 |
| Import of goods (billion USD) | 44 | 35.1 | 38.7 | 39.7 | 40.8 |
| Trade Balance (Billion USD) | -9.6 | -13 | -1.4 | 5.9 | 1.2 |
| Industrial production (% change) | -3.7 | -10 | 4 | 1 | 0.8 |
| Population (millions) | 43.4 | 44.3 | 45.2 | 46.1 | 47 |
| Competitiveness | ON | ON | ON | ON | ON |
| OECD export risk | 05.VII | 05.VII | 05.VII | ON | ON |
Source: EIU, OECD, IMD
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | -12.1 |
| Public debt (% of GDP) | 63.4 |
| Current account balance (billion USD) | -7.5 |
| Taxes | 2022 |
| AFTER | ON |
| F.O | ON |
| VAT | ON |
The ADLR budget law for the year 2022 does not foresee a significant change in the government’s priorities and proportionally distributes the budget to the departments in a comparable way as in the previous year, approximately 25% of the budget goes to the Ministry of Defense. It is primarily aimed at improving the investment environment, promoting exports, rationalizing state spending and expanding the income tax base. From a macroeconomic perspective, it predicts GDP growth of 3.3%, non-oil revenue growth of 3.7% and inflation of 3.7%. The text of the law proposes a transition to a national system of financial compensation for households that will be entitled to this type of support. According to the prime minister, parliament will decide on the adjustment of subsidies based on studies “advocating a return to a fair distribution of wealth” and broad consultations. At the same time, the government decided to give up profits from the activities of the national energy companies Sonatrach and Sonelgaz, so that companies have more funds available for investment. The income of Algerian companies from the export of goods and services outside the oil and gas sector will be exempt from income tax and corporate profit tax. The increase in oil and gas prices in the year from mid-2021 will have a positive impact on Algeria’s public finances.
According to Economic Intelligence Unit data, in 2021 the state budget balance reached -12.1% of GDP and the public debt reached 63.4% of GDP. With regard to higher oil and gas prices in 2022, in contrast to the situation in previous years (current account balance in 2021 in the value of -7.5 billion USD), a positive current account balance is expected, which, according to the estimate of the International Monetary Fund was to reach 2.9% of GDP in 2022. In recent months, the government has focused mainly on strengthening the country’s export potential. In recent years, the difficult economic situation and the lack of foreign exchange reserves have led the Algerian government to seriously consider borrowing from international institutions, however this step is contrary to the traditional consideration of ADLR’s involvement in the international system vs. maintaining state sovereignty. With regard to higher oil and gas prices from the 2nd half of
Banking system
Algeria has one of the largest banking systems in Africa, which is, of course, relatively non-transparent and dominated by state banking institutions (90% of the banking system), yet the IMF rates it as satisfactory in its studies. The biggest obstacle is the general lack of digital tools – internet/mobile banking, credit cards, etc. Until recently, the lack of financial products was also an obstacle, which was also one of the causes, in addition to general mistrust of institutions, for which the majority of household funds were kept outside the banking system. BNA therefore offers a range of Islamic financial products from autumn 2020, from insurance to leasing to other loans. Since the beginning of the pandemic, there has been a 400% increase in electronic payments, and the use of regional CIB and EDAHABIA bank cards is also expanding.
Banque Extérieure d’Algérie (BEA) – largest market share, parent bank of the state energy company Sonatrach
Banque Nationale d’Algérie (BNA) – the second largest in the market, the first commercial bank active since 1966, holds 20% of the market
Other state banks: Banque de l’Agriculture et du Développement Rural (BADR), Caisse Nationale d’Epargne et de Prévoyance (CNEP), Banque de Développement Local (BADL), Crédit Populaire d’Algérie (CPA)
After the oil industry, banking is the second sector with the highest rate of foreign direct investment. The remaining 10% of the banking market is made up of private banks with foreign owners – 9 subsidiaries, 3 branches and 1 joint venture. No private bank with exclusively Algerian capital has operated here since Khalifa Bank. Crédit Agricole CIB had its license revoked in April 2021 for undisclosed reasons.
Société Générale – the largest private bank
Gulf Bank Algeria
BNP Paribas El DjazairAl Baraka – the first Islamic bank in the form of a joint venture with BADR
Al Salam Bank – Bahraini Islamic bank active since 2008
HSBC Algeria
Citibank Algeria
Natixis Algeria
Arab Banking Corporation
Housing Bank for Trade and Finance
Fransabank Al Jazair
Trust Bank Algeria
Arab Bank Plc
International letters of credit, documentary collection and bank guarantees are commonly available. The Association of Banking Institutions ABEF, on behalf of the Central Bank, issues a regulation regarding the protection of foreign exchange reserves, importers have a long-term obligation to domiciliate, there is talk of the possibility of introducing a commission for assessing foreign exchange transactions.
Tax system
Personal income tax is progressive according to the bands below:
0 – 120,000 0% (the lowest income band is exempt as well as capital income from the sale of real estate up to this amount)
120,000 – 360,000 20%
360,000 – 1,440,000 30%
1,440,000 and more 35%
Taxable income is based on several categories: salary-wages-pensions, cash remuneration, some capital income, earnings from agricultural activities, non-salary remuneration and financial remuneration and income from real estate. Residents are taxed on income from all activities worldwide, while non-residents are taxed only on income from activities carried on in the ADLR. Special bonuses and bonuses are subject to a tax rate of 10%.
Corporate income tax
Manufacturing 19%
Construction and public works 23%
Tourism and spa industry (excluding travel agencies) 23%
Hydraulics 23%
Other activities 26%
Tax rates by type of income:
Income Residents Non-residents
Dividends 15% 15%
Interest 10% 10%
License fees 0% 30%
Service charge 0% 30%
Dividends paid to DZ or foreign companies are subject to withholding tax of 15%, or according to the double taxation agreement. Not many of these are closed to ADLR and a list of them is available here. Negotiations on an agreement with the Czech Republic are currently suspended.
The employer pays taxes for employees in the amount of 26% for social. and healthy insurance from the super gross salary, then the employee pays another 9% from the gross salary. The correctness of the documentation of the tax return and internal valuation is subject to a fine of 2 M DZD.
VAT
Standard 19%
Reduced 9%
Exemption from VAT applies to: all exports, start-ups, companies with a turnover of less than 15 M DZD (special regime).
Tax benefits can be applied if the business plan is registered with the National Investment Promotion Agency (ANDI). It varies according to the sector of activity, location and number of jobs created. In the implementation phase, 3-5 years exemption from VAT, in the profit phase, 3-10 years exemption from IBS and TAP.
Duty
Imports are subject to customs duties of 0%, 5%, 15% and 30%, sometimes to a special duty of 2%, and over 1000 items are subject to so-called DAPS safeguards of 30-120%.
