30.05.2026
Algeria’s economy remained resilient in 2025, supported by strong non-hydrocarbon activity, public spending, investment and household consumption. Growth is expected to moderate in 2026–2027 as gradual fiscal consolidation begins and hydrocarbon-sector performance remains constrained. Inflation has fallen sharply, helped by lower food prices and a stable official exchange rate, but fiscal and external pressures have increased. The fiscal deficit remains very large, while the current account has moved into deficit as hydrocarbon revenues weaken and investment-driven imports rise. Algeria’s medium-term challenge is to reduce dependence on hydrocarbons and public spending while creating more private-sector jobs.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 3.8 | 3.7 | 3.1 |
| Inflation (%, yoy) | 1.4 | 2.8 | 3.4 |
| Employment rate (% of working-age population, 15+) | 36.5 | 36.9 | 37.0 |
| Fiscal balance (% of GDP) | -13.0 | -7.4 | -10.8 |
| Gross public debt (% of GDP) | 47.2 | 49.8 | 60.3 |
| Current account balance (% of GDP) | -5.9 | -2.4 | -9.7 |
Growth remains supported by non-hydrocarbon activity
Algeria’s real GDP growth is estimated at 3.8% in 2025, supported by robust non-hydrocarbon activity, strong investment and resilient household consumption. In the first half of 2025, non-hydrocarbon growth helped offset a contraction in hydrocarbon GDP, while services, non-hydrocarbon industries and agriculture all contributed to activity.
Growth is projected to slow slightly to 3.7% in 2026 and 3.1% in 2027. The slowdown reflects gradual fiscal consolidation, slower wage growth, lower investment spending and continued constraints in the hydrocarbon sector. The outlook remains positive, but growth is still heavily supported by public spending rather than productivity gains or broad-based private-sector dynamism.
Inflation has fallen sharply
Inflation decelerated strongly in 2025, reaching an estimated 1.4%, driven mainly by falling food prices and a stable official exchange rate. Lower inflation supported household purchasing power, especially alongside public wage increases, pensions and unemployment benefits.
Inflation is projected to rise moderately to 2.8% in 2026 and 3.4% in 2027, but remain well below the high levels seen in 2022–2023. Risks come from exchange-rate pressures, import costs, food prices and possible fiscal expansion. Continued monetary and exchange-rate stability will be important for keeping inflation contained.
Fiscal pressures remain large
Algeria’s fiscal deficit remains very large, despite a temporary improvement expected in 2026. The deficit is estimated at 13.0% of GDP in 2025, reflecting high public spending, wage increases, subsidies, investment outlays and weaker hydrocarbon revenues. It is projected to narrow to 7.4% of GDP in 2026, helped by higher hydrocarbon prices and a more favourable revenue environment, before widening again to 10.8% in 2027.
Public debt remains moderate compared with many peers, but is projected to rise quickly from 47.2% of GDP in 2025 to 60.3% in 2027. Debt is largely domestic and long-term, which reduces immediate external-financing risk, but persistent large deficits will gradually weaken fiscal buffers. Stronger non-hydrocarbon revenue mobilisation and better targeting of spending will be essential.
External balance is vulnerable to hydrocarbons and imports
The current account deficit widened sharply in 2025 as lower hydrocarbon prices and export volumes coincided with rapid import growth linked to investment and public spending. The deficit is estimated at 5.9% of GDP in 2025, projected to narrow to 2.4% in 2026, and then widen again to 9.7% in 2027 as hydrocarbon prices are assumed to return to lower levels.
Algeria still has substantial foreign-exchange reserves, but the external position is highly sensitive to oil and gas prices, hydrocarbon production, import demand and the energy transition. A weaker hydrocarbon market or faster import growth would put pressure on reserves and the balance of payments.
Overall outlook
Algeria’s outlook remains broadly positive in the near term, but macroeconomic vulnerabilities are increasing. Growth should remain moderate in 2026–2027, while inflation is expected to stay contained. The main risks are fiscal: large deficits, rising debt and dependence on hydrocarbon revenues. Sustained progress will require stronger fiscal rules, better management of resource revenues, subsidy reform, improved public-enterprise efficiency, private-sector development and deeper diversification beyond oil and gas.
Sources:
World Bank, Algeria Macro Poverty Outlook, April 2026.
International Monetary Fund, Algeria: 2025 Article IV Consultation and Staff Report, September 2025.
International Monetary Fund, World Economic Outlook, April 2026.
African Development Bank, Algeria Economic Outlook, 2026.
Bank of Algeria, Monetary and Financial Developments, 2025–2026.
