With 98% of its current income coming from the hydrocarbon sector, Algeria is looking for ways to diversify its economy to lessen its dependence on the sector.
“Algeria is called upon to exert a great effort to bring its economy out of dependence on oil and to diversify its resources so as not to be a hostage to the fluctuation of oil prices in international markets,” president Abdelaziz Bouteflika said at an August 4 meeting on the energy sector.
The country’s dependence on the sector leaves it open to vulnerabilities in the event that there is a big drop in oil prices. Economists believe that the longer the dependence continues the more vulnerable the country is.
"The danger of the situation in the medium term is continuation of the economy being excessively linked to oil and gas prices in the world market, and the absence of any serious strategy to support economic diversification," economist Mohamed Sellama told Magharebia.
He said that at the end of 2010, the hydrocarbon sector comprised a third of GDP, the equivalent of 98% of total exports and more than 70% of budget revenue.
The country does have huge potential as a source of solar power which could provide export income from the ever growing consumer base in the EU and in fact plans are in the works for just that; however, whether that is enough of a diversification is yet to be seen. In the opinion of many citizens, continuing to rely entirely on oil will lead the Algerian economy into an abyss. Businessman Mohamed Amarni told Magharebia, "Despite the government’s announcing several measures to raise the level of public expenditure and to increase salaries, they remain insufficient to address the structural imbalances of the Algerian economy." Amarni said Algerian companies face administrative complexities and a bureaucratic banking system that stands in the way of efforts to improve competitiveness.
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