World Bank Warns Of Social Unrest In Algeria Due To Oil Crisis

World Bank did not miss Algeria’s recourse to unconventional funding, before launching the application of the mechanism of this type of financing.

It explained its implications for the economic and social situation, and warned of the growing inflation problem, and expected a significant decline in GPD at the medium term. 

It included the increasing taxation and unemployment rate among youth, the revision of the policy of support, the social aid and the shift to selectivity in the category of risks to provoke social boiling.

In the wake of IMF reports, the World Bank released its report on economic indicators for the Middle East and North Africa region this month. Although the law that is amending the Monetary and Credit Law, which is approved by both chambers of parliament, nothing has yet been issued in the Official Gazette. 

Public treasury has not yet resorted to borrowing from the Central Bank, but the choice of the Algerian government, or as Ouyahia described as the forced decision, reserved a place in the report of the World Bank, which referred in one of its chapters to the unconventional funding that is adopted by Algeria. 

The report stated that “this new policy is capable of lifting the pressure and problems that are facing the short-term public expenditure, but it may also result in delays in implementing the structural reforms that the Algerian economy currently needs”.

In this case, the World Bank, which already predicted a drop in the Algerian reserves below the $ 100 threshold, expects that the unconventional funding, borrowing from the Bank of Algeria or printing money will raise pressure on public spending, but will exacerbate the inflation problem and resulted in a significant decline in GPD at the medium term.

In addition to these negative aspects, the report addresses the risks of social boiling and expected an increase in its levels, and justifies its expectations with a set of indicators, the most important of which is the increase in taxes and high unemployment among young people. 

The World Bank report did not overlook the intention of Algeria to review the social transfer system, or what is known as the “social” system among people.

Report of the International Financial Authority explained that the new policy of support that the government intends to resort to in the future should have a set of conditions for its success, especially at this point of the need for a better system of social protection and a more accurate system of remittances, and the need to accompany the shift in how to support a comprehensive media and awareness campaign.

The World Bank faults the Algerian government with the weight of structural transformations, weak decentralization and low participation of women in the labor market. 

In the budget deficit, which is one of the black spots in the Algerian financial sector, the Algerian GDP growth curve is expected to remain in decline for two years following an increase in growth of 3.8% in 2014, falling to 3.7% in 2015, and maintaining a decline of 2.2% last year. 

It predicts that the growth will fall to 1.5% in 2019 after falling up to 2% next year.

The deficit in the budget balance will be reduced according to the report, which is far from the expectations of the government within the draft fiscal law for the next year, as the deficit is expected to decline to 11.5% by the end of the current year and the gap will continue to reach 7.3% and 5.7% in 2019, and Algeria shares this with most of the Arab oil-exporting countries in these macroeconomic indicators, as the authors of this report show that all the oil-exporting countries resorted to a radical revision in public expenditure, and expect Algeria to benefit from the recovery of global demand for this product in the next two years as a result of an improved global economic growth.