IMF gives Algeria a clean bill for 2013 recommending measures to keep long-term macroeconomic sustainability

By bne IntelliNews January 30, 2014

The IMF’s executive board in its Article IV consultation was satisfied with Algeria’s overall economic performance in 2013 while making a number of recommendations to reach long-term macroeconomic sustainability. The IMF praised Algeria’s success in bringing down inflation, unemployment and inequality in 2013 warning that strong credit growth and calls for another round of public-sector wage increases could affect price stability projected to remain at the government’s target of 4.5% in 2014.

The IMF underscored that rising domestic consumption and declining hydrocarbon production are squeezing Algeria's export volumes and revenues. The IMF cautioned the Algerian authorities of the long-term impact of their reliance on income from hydrocarbon exports to maintain fiscal and external balances. Hence, it encouraged the authorities to take measures to consolidate macroeconomic and financial stability, ensure long-term fiscal sustainability, and promote strong private sector-led non-hydrocarbon growth and robust job creation.    

The fund encouraged the authorities to continue their efforts towards fiscal consolidation initiated in 2013 through containing public sector wage growth, the gradual phasing out of subsidies and reduction of tax exemptions. Those measures ought to be balanced with maintaining high levels of capital spending to achieve an overall real GDP growth rate of 4.3% and a non-hydrocarbon real GDP of 5.3% in 2014.

In addition, the IMF urged the Algerian government to adopt wide-ranging structural reforms conducive to improving business environment, enhancing cost competitiveness and relaxing the restrictive FDI regime. Labor market reforms have been singled out of particular importance to increase labor market flexibility and ensure that job seekers are equipped with the right skills.

 

 

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