Algeria's economy: Balancing oil wealth and diversification dreams

In Algeria‚ Abdelmadjid Tebboune secured his second (and final) term as president roughly a month ago. Under his leadership the country has made some progress in areas like infrastructure housing and agriculture. However‚ Algeriaʼs economy still lacks diversity and suffers from high joblessness. About a year ago‚ young people faced a 31% unemployment rate (according to the U.S International Labor Organization)

Algeriaʼs economic woes stem from its socialist past and over-reliance on oil and gas money. This mix left the nation stuck between state control and free markets. Years of anti-corruption efforts also made business owners shy away from taking risks and being creative.

Theres no doubt that Algeria is an oil-rich nation. It has the worlds 10th-largest proven natural gas reserves and ranks fourth in gas exports (as reported by the U.S International Trade Administration). Sonatrach‚ Algerias state oil company found that two-thirds of the countrys potential oil areas are still not fully explored. Last year oil and natural gas made up 20% of GDP 90% of exports and 60% of government income.

But Algeria has much more to offer – with the right changes it could become more than just an oil-based economy. While oil and gas have powered Algeria for decades‚ this industry hasnʼt created many good jobs. To move forward Algeria needs to:

• Bring back a spirit of entrepreneurship
• Get more investment
• Rely less on oil and gas

There are many areas where Algeria could do well such as:

• Farming
• Mining
• Green energy
• Moving goods
• Making things
• Tourism
• Computer services

After gaining freedom from France 62 years ago Algeria tried to build up heavy industry. This plan didnt work out well and the countrys economy became too dependent on oil and gas. Since then Sonatrach has been the backbone of Algerias economy. The International Monetary Fund (IMF) says that last year about 60% of the governments money came from oil and gas – this makes spending very unpredictable just like oil prices.

The state has a pervasive role in the economy where it constantly bails out deficient state-owned enterprises

Algeria is careful with money because it doesnt want to rely on outside help again. This caution comes from a tough time in the 1990s (about 30 years ago) when the IMF made Algeria cut spending a lot. Now‚ Algeria has almost no foreign debt. But this careful approach means Algeria misses out on working with other countries economies.

The countryʼs path to success needs to balance keeping control of its economy and being open to trade and foreign money. Algeria could have a mix of state-run businesses in important areas like energy farming and defense‚ while letting foreign companies invest in other sectors such as making things moving goods tourism and money matters – similar to what China did. Complete free markets probably wont work for Algeria.

Three main ideas could help change Algerias economy:

• Make a clear plan for change with ways to measure success (like Saudi Arabias Vision 2030)
• Start a savings fund using money from oil gas and minerals
• Create special business areas to bring in investors and make jobs

Tebboune has a chance to make big changes to Algerias economy. He must take this opportunity to help the country grow and succeed