Algeria's economy: a small sector that pays for everything

Why a small sector carries the state

The World Bank's figures for 2020 to 2024 give hydrocarbons 13% of GDP, 83% of exports and 46% of budget revenue. Earlier periods show the same shape more starkly: in 1993 hydrocarbons brought in 98% of export revenue, and in 2007 at least 95% of export earnings. Britannica states it simply: virtually all of Algeria's foreign exchange comes from petroleum and natural gas. Its list of other exports runs to phosphates, vegetables, dates, tobacco and leather goods.

The imbalance is structural: the energy sector is capital-intensive and hires few people, so the jobs sit elsewhere. Government is the largest employer, with 32% of the workforce in figures Wikipedia gives without a year; agriculture has about 14%, trade 14.6%, industry 13.4% and construction and public works 10%. Oil and gas revenue passes to those jobs through the budget, as wages, transfers, subsidies and public investment.

That mechanism has worked in both directions. After the price rise of 1973, revenue financed the industrial plan of the 1970s. When prices fell by 40% in 1986, the state could no longer pay its wage bill, debt service absorbed 70% of the country's resources between 1989 and 1993, and the unrest of 1988 ended the one-party system. The upswing ran the other way. Reserves grew from US$12 billion in 2000 to US$99.3 billion at the end of 2007, and foreign debt fell from a peak of US$28 billion in 1999 to about US$5 billion; in March 2006 Russia wrote off US$4.74 billion of Soviet-era debt as Algeria agreed to buy US$7.5 billion of Russian arms. The same cycle is visible in the IMF's recent figures, below.

How Sonatrach came to run the Sahara

Oil and gas were found in the Algerian Sahara in the mid-1950s, during the war of independence. Gas was first struck at Hassi R'Mel in 1956, and oil production began in 1958 at three main fields: Hassi Messaoud in the north-east of the desert, Zarzaïtine-Edjeleh on the Libyan border and El-Borma on the Tunisian one. French companies did most of the early prospecting.

The state oil company, Sonatrach, was set up in 1963 and 1964. In 1971 the government took 51% of the French oil companies' Algerian assets and nationalised the hydrocarbon industry, handing their operations to Sonatrach. Liberalisation in the 1990s let North American and European firms back in through joint ventures, and more than a dozen were working in the country by the late 1990s. A hydrocarbons law of April 2005 opened exploration contracts to foreign competition, and a new hydrocarbon law followed after 2020.

Sonatrach's annual report for 2024 put primary hydrocarbon production at 193.7 million tonnes of oil equivalent, against 193.8 million in 2023 and 189.6 million in 2022. Net profit rose 20% to 812 billion dinars, about US$6 billion, and investment rose 11% to 835 billion dinars, 79% of it in exploration and production. Its refineries processed 26.5 million tonnes of crude in 2024 and produced 10.8 million tonnes of diesel and 3.7 million tonnes of petrol. The company described 2024 as a less favourable year than 2023 because oil and gas prices were lower.

Britannica describes Algerian gas as more than 80% methane, with ethane, propane and helium, and expected petroleum reserves to run out in the first half of the twenty-first century, leaving gas exports as the larger source of income. The installations lie deep in the desert, and in January 2013 militants seized the gas plant at In Amenas near the Libyan border; 38 foreign workers and an Algerian guard were killed before special forces retook it.

Where the gas and oil go

Most of what Algeria sells leaves by pipe or tanker for Europe. Four oil pipelines run from the fields to Mediterranean ports. Gas crosses the sea through submarine pipelines: the Trans-Mediterranean line via Tunisia to Sicily and Naples, completed in 1981; the Maghreb-Europe line to Spain through Morocco, opened in 1996, extended to Portugal in 1997 and closed in late 2021 when Algeria cut ties with Morocco; and Medgaz, a direct line to Spain operating since 2011. Gas liquefaction plants stand at Skikda, Arzew and Béjaïa.

The Observatory of Economic Complexity puts Algeria's goods exports at US$48.2 billion in 2024, down 14.4% on 2023. Its product and partner breakdown for that year:

Trade with France has shrunk as a share, and trade policy has moved slowly. Algeria signed an association agreement with the European Union in 2001, which took effect in September 2005, and opened talks to join the World Trade Organization in June 1987; those negotiations stopped in 2014. Britannica notes that France took four-fifths of Algeria's trade in 1961 and about one-tenth in the early twenty-first century. French imports of Algerian farm produce, wine above all, were severely restricted after independence.

What Algeria buys to eat

Before 1962 the economy rested on agriculture and complemented France's; by the late twentieth century, in Britannica's account, the country that exported food in the 1950s imported about three-quarters of what it ate. More than four-fifths of the land cannot be farmed, most of the rest is fit only for pasture, and agriculture contributes less than a tenth of GDP. Winter wheat and barley grow on the High Plateaus around Constantine and on the Sersou plateau, and olives, dates, tobacco, vegetables and livestock make up much of the rest. Fishing lands only part of its estimated potential catch despite the long coast, because refrigeration and canning to move fish inland are scarce.

Wine is the clearest case of a colonial crop that did not survive independence. It was the mainstay of colonial agriculture and exports; after France banned Algerian wine imports, Boumedienne had vines uprooted across large areas, and output fell to about one-tenth of its 1950s level. The agrarian revolution of November 1971 aimed to raise domestic food supply by redistributing land to cooperatives; privatisation of state farms from the 1980s then produced long disputes over ownership. Algeria had about 20 large dams at independence and nearly twice as many by the late 1980s.

The import bill shows the result: the OEC lists wheat at US$1.76 billion as Algeria's leading import in 2024, followed by cars at US$1.6 billion, concentrated milk at US$1.33 billion, raw sugar at US$1.06 billion and maize at US$1.02 billion. China supplied US$11.7 billion of imports that year and France US$5.17 billion.

How the state tried to industrialise

From 1967 the planners put heavy industry first. The El-Hadjar steelworks at Annaba was completed in the early 1970s to feed domestic manufacture of tractors, buses, lorries and machine tools, and the Skikda petrochemical complex grew beside it with a gas liquefaction plant, an ethylene factory and a plastics works. Arzew added a refinery and a nitrogen fertiliser plant; Sétif, methanol and plastics; Annaba, phosphate fertiliser.

The mines supplied part of the raw material: high-grade iron ore from open workings at Ouenza goes almost entirely to the domestic steel industry, and major medium-grade deposits lie at Gara Djebilet near Tindouf. Phosphate is mined at Djebel Onk south of Tébessa, about a third of it for the Annaba fertiliser plant, and zinc and lead at El-Abed near Tlemcen.

State-owned enterprises accounted for about 90% of Algerian production in the crisis years. In the 1980s they were broken into smaller units; import bans and debt then ran down equipment, and the 1990s brought closures and job losses. The IMF standby arrangement of April 1994, an extended facility that ended on 30 April 1998, and Paris Club reschedulings in 1995 and 1996 came with devaluation of the dinar and the freeing of prices and trade.

Where the public money stands now

The World Bank recorded growth of 3.8% in 2021, 3.6% in 2022 and 4.1% in 2023, driven by public spending that rose by more than 60% over those three years. The IMF's Article IV consultation, concluded on 11 September 2026, describes strong growth paid for with large deficits. Real GDP grew 3.7% in 2024 and an estimated 3.9% in 2025, carried by investment, while hydrocarbon output fell 1.3% in 2024. Consumer prices rose 9.3% in 2023 and 4.0% in 2024, and inflation climbed from minus 2.0% in September 2025 to 5.2% in April 2026 as gold pushed up jewellery prices.

The fiscal and external figures turned sharply. The overall budget balance went from a deficit of 5.5% of GDP in 2023 to 14.0% in 2024, and the IMF estimated 10.5% for 2025. Government debt was 48.1% of GDP in 2024 and an estimated 52.1% in 2025. Gross official reserves fell from US$70.6 billion in 2023 to US$68.9 billion in 2024 and an estimated US$51.0 billion in 2025, as imports surged and hydrocarbon exports declined. The Bank of Algeria lent directly to the government, a flow the IMF put at 3.7% of GDP in 2025.

Looking ahead, the IMF projected growth of 3.8% for 2026 and government debt of 79.0% of GDP by 2031, with reserves down to US$19.8 billion that year. Its board urged gradual fiscal consolidation, reform of energy subsidies with targeted support for poor households, greater exchange rate flexibility to narrow the gap with the parallel market, and limits on central bank financing to exceptional cases.

Who works and who does not

The World Bank put unemployment at 12.7% in 2024, 25.4% for women and 29.3% for people aged 15 to 24. Organised labour is narrow: Britannica names the General Union of Algerian Workers as the only nationwide federation, and Freedom House notes that new unions need government approval, which is hard to obtain. Wikipedia gives an overall rate of 11.8% for 2023. Wikipedia's economy article describes unemployment as chronic, driven by new entrants to the workforce and fewer chances to emigrate, and the capital-intensive hydrocarbon industry absorbs few of them.

The dinar is issued by the Bank of Algeria, founded in 1963, and managed against the dollar in a loose float; oil is sold in dollars while most imports are priced in euros. On 29 September 2026 the bank quoted US$1 at 133.63 dinars and €1 at 151.64. Money also moves outside the banks, at street markets such as Square Port-Saïd in Algiers, at a rate that diverges widely from the official one.

A run of laws since 2020 aims to change the model: a new investment law in 2022, a banking and monetary law and an economic land law in 2023, accession to the African Continental Free Trade Area in 2024 and a mining law in 2025. The World Bank reclassified Algeria as upper-middle income in July 2024. Both the World Bank and the IMF describe an economy still dependent on oil and gas, and both call for growth led by the private sector.