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Algeria will face “lean” years because of world oil crisis

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Algeria will face “lean” years because of world oil crisis
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A report issued Wednesday by the US business and investment Bank “Avrikor-Aici”, said that Algeria would probably face difficult years ahead because the significant decline of oil prices not witnessed over the past 5 years and a half by hitting on Wednesday less than 50 dollars a barrel on the world market.

The report stressed that the oil companies operating in Algeria will reduce as a result their production capacity, particularly in the area of exploitation with heightened fears of a global oil supply glut.

In the light of the continuing collapse of oil prices by more than 50 percent since June 2007, “the oil industry will be experiencing a severe recession,” said the report, adding that the African continent and the Middle East region, particularly Algeria and Angola will be in the “danger zone” because of the increase in expenditures from year to year as the growth rate in those countries is up to 6 percent.

It further surmised that companies active in the energy field at the global level will probably curtail their investment from around 10 to 15 percent.

Algeria will post a 41.7 billion euro ($51.2 billion) deficit next year due to the sharp fall in oil prices, according to a budget bill signed last Tuesday by President Abdelaziz Bouteflika.

The budget law envisions revenues of 46.9 billion euros and outlays of 88.6 billion euros, an increase of 15.7 percent on this year, for a deficit equivalent to 22.1 percent of GDP.

But the price per barrel used for revenue calculations is $37, sharply below the latest record low for Brent North Sea crude of less than $50

Algeria which generates about 95 percent of its export revenue and 60 percent of government income from hydrocarbons, is being hit by the recent collapse in oil prices that has taken them to levels not seen in five and a half years.

But President Bouteflika said during a recent cabinet meeting that he was convinced Algeria “will survive without major difficulties the serious disruptions” in global markets.

The budget forecasts GDP growth of 3.4 percent in 2015, a figure rising to 4.3 percent if hydrocarbons are removed from the equation.

Government reserves will be used to cover 88.3 percent of the expected deficit.

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