The World Bank advises Algerian Government to slash public sector workers’ salaries

The World Bank (WB) has waxed pessimistic about the evolution of the economic situation in Algeria, in an assessment survey dated Tuesday, January 10th, as the Bretton Woods Institution foresees a slowdown in the national economic growth, for the next three years.Above all, the World Bank is concerned about the impact of “oil price instability” and “public discontent” over the government’s fiscal, budgetary and subsidy reforms.

*Falling national economic growth expected  by 2019

Accordingly, growth forecasts for Algeria are declining from 3.6% in 2016 to 2.9% in 2017. Subsequently, GDP growth is expected to slow down further in 2018, with a rate of 2, 6%, before rebounding slightly in 2019, to 2.8%, indicates the Bretton Woods institution.

The reason for this is related to “plummeting spending on public works and delays in reforming the tax system and subsidies”. That is: the decline in public investment, especially in infrastructures – the main engine of growth – will adversely weigh on the creation of wealth in Algeria.

At the same time, the absence of reforms in the field of taxation, already considered one of the most burdensome, prevents the release of the country’s potential for growth. 

Finally, the maintenance of the present subsidy system, considered to be extremely costly, also has adverse effects on Algeria’s economic prospects.

*Pressure of public opinion and instability of oil prices

Overall, the reduction in government investment in the countries of the Middle East and North Africa (MENA) region, including Algeria, is due to the “high volatility of oil prices”, which undermines public spending and fiscal guidelines, “the World Bank said.

Another sticking element of complication for these nations is “dissatisfaction of the public opinion”, making “budgetary and structural reforms” difficult, according to the international monetary institution. 

As a result, this logjam situation “could have detrimental effects on confidence, foreign investment and growth”, concluded the World Bank.