World Bank: “Algeria among countries that use exchange reserves at will”

The World Bank (WB) said in its annual report that the Algerian economy could not bear the deficit due to the impact of the oil prices’ shockwave, which compelled the government to resort to the country’s foreign currency reserves and the receipts Stabilization fund to finance the growing budget deficit.

According to this report, emerging markets and countries which are exporting basic commodities have struggled to adapt to the low prices of oil and other essential products.

And thus, having forecast growth of 3.9% for 2016 in January, the World Bank has lowered the forecast to 3.4%, against 2.9% in 2015, but stressed that Algeria’s economic growth should rebound thanks the activity of the gas sector by the entry into production of several gas projects and the strength of the activity excluding hydrocarbons. 

In this sense, Algeria held 9th place in the natural gas production in 2014 with 83 billion m3 extractions, according to a report from the World Bank.

According to the report of the World Bank on the economic outlook for the year 2016, this tendency to use foreign exchange reserves and regulatory capital is unique to Algeria and to the countries of the Gulf Cooperation Council and is due to the heavy dependence on the economy of these countries on hydrocarbons and the deleterious impact of the oil price fall.

The report cites, among others, Algeria, Iraq and Saudi Arabia as countries which use and abuse of these reserves in order to fill the budget deficit induced by the oil shock.

In this respect, Algeria is badly placed in the MENA (Middle East and North Africa) compared to Iraq, despite the latter’s current instability, and better than Yemen and Syria where growth is expected to rise slightly in 2016.