For the first time since its independence in 1962, and something that went largely unnoticed, Algeria posted the lowest GDP per capita of the three Maghreb countries in 2021, before the exceptional and brief rise in the price of hydrocarbons observed the year next. The gigantic natural wealth of Algeria is therefore no longer enough to mask the economic reality of the country, which is very late compared to its French-speaking neighbors in the Maghreb, and which should experience serious difficulties around 2028.
According to World Bank data, Algeria’s GDP per capita stood at $3,691 in 2021, the latest year for which statistics are available, compared to $3,807 for Tunisia and $3,795 for Morocco. which had until then always occupied the last place among the three Maghreb countries, since their independence.
A lagging economy…
By overtaking Algeria, Morocco and Tunisia have thus achieved a remarkable performance, given their low natural wealth in comparison with their neighbor, one of the main world producers of hydrocarbons. First African producer of natural gas and third for oil, Algeria has indeed extracted 101 billion cubic meters of natural gas in 2021 and about 900 thousand barrels of oil per day during the same year, i.e. respectively 53 times and 24 times more than Tunisia, whose meager resources in this area are, however, themselves considerably greater than those, almost nil, of Morocco. Moroccan hydrocarbon production is so insignificant that the country produced, for example, only 250 barrels of oil per day in 2021, or about 3,600 times less than Algeria,
This development is the result of the inefficient economic policies followed by Algeria since its independence and the rise of its hydrocarbon production when the country was by far the most developed in the Maghreb, and even in the entire Arab world. thanks to the numerous and modern infrastructures built and left by France (which had spent much more in the Maghreb countries than they brought in, and especially in Algeria). Thus, and for lack of diversification, the Algerian economy is today still very heavily dependent on hydrocarbons, which still represent approximately 90% of national exports (88% in 2022). And this, unlike Western oil and gas countries, such as Canada and the United Kingdom (respectively 30% and 11%, only), and its two neighbors in the Maghreb,
Indeed, and in parallel with the establishment of a favorable framework for national and international investments, Tunisia and Morocco have succeeded in establishing numerous industrial sectors, enabling them in particular to occupy the first places at the continental level in terms of industrialization and business environment. Thus, and according to the latest ranking published by the African Development Bank (AfDB), in November 2022, Morocco and Tunisia ranked second and fourth respectively among the countries of the continent in terms of industrialization, while Algeria does not came in 11th position, behind Senegal (seventh and most industrialized country in West Africa, soon to be joined by Côte d’Ivoire, which recently overtook Ghana), or Kenya (ninth,
Morocco should also very soon reach first place in the ranking, overtaking South Africa with which the gap is now less than 1%, after having been divided by 17 since 2010 (current scores of 0.8327 and 0.8404, respectively). This development is also explained by the constant economic decline of South Africa, as evidenced by the almost zero growth recorded over the last decade (0.9% on average annually over the period 2013-2022), or the fact that it is one of the very few African countries to experience a decline in the rate of access to electricity, even though a significant part of the population is still not connected to the network electricity (15.6% at the end of 2020, compared to less than 1% in each of the Maghreb countries, according to the World Bank).
Morocco’s current second place had long been occupied by Tunisia, which recently fell to fourth position, behind Egypt, following the difficulties it has been going through since its 2011 revolution. Morocco and Tunisia also stand out for the great progress made, as demonstrated by the fact that these two countries were placed, respectively, in third and fifth place on the continent in the latest ranking published in this area by the World Bank, just before Covid-19, when Algeria only occupied the 33rd position (and the 162nd globally), even arriving very far behind many countries in sub-Saharan Africa (such as the very dynamic Côte d’Ivoire, Senegal and Togo).
In contrast to Morocco’s economic take-off
The judicious economic policies followed by Algeria’s two main neighbors have thus enabled them to make a considerable leap in recent decades. If Tunisia was a pioneer, Morocco has truly taken off over the past twenty years and stands out today by being the only Arab country to have a real automotive industry (and one of only two on the continent, with South Africa, which it is now on the heels of with a production of nearly 470,000 vehicles in 2022, mainly intended for export, compared to only 25,000 for Egypt, the most populous country in the Arab world), and the only African country to have trains belonging to the category of high-speed trains, traveling at around 300 km/h (and the only one at the Arab level, with the extremely wealthy Saudi Arabia). Moreover,
Similarly, the dynamism of the Moroccan economy is also reflected in the number of national companies present among the largest companies on the continent. Indeed, and according to the latest annual ranking published by the magazine Jeune Afrique, last March, Morocco had no less than 56 among the 500 largest African companies in 2021, against only 12 for Algeria, or 46 for Egypt, an Arab-English-speaking country in North Africa with a population 2.8 times larger (and which should therefore, theoretically, be much better represented than the Cherifian kingdom). It should also be noted that Algeria even arrives quite far behind Tunisia (21 companies) or even Côte d’Ivoire (27), and this, despite their much lower population (Tunisia even being almost four times less populated).
But if the good performances of Morocco result, first of all, from the good economic strategies adopted, as well as from the size of its internal market (three times larger than that of Tunisia, but a fifth smaller than that of Algeria ), they can also be explained by the country’s membership of the French-speaking world, which has enabled it to attract very large French investments and to benefit from privileged access to the vast and neighboring French-speaking sub-Saharan Africa. Bringing together 22 countries, it is, moreover, the most economically dynamic, stable, least indebted and least unequal part of the continent (in particular, in 2022 it achieved the best economic performance for the ninth year consecutively and the tenth time in eleven years, thus posting annual growth of 3.5% on average over the decade 2013-2022 – and even 4.0%, excluding the very special case of Equatorial Guinea, compared to only 2.2% for the rest of sub-Saharan Africa). Due to its geographical and linguistic proximity, its dynamism and its greater stability, French-speaking sub-Saharan Africa was thus the starting point for the international expansion of Moroccan companies, which were thus able to gain in size and experience, before being able to then extend beyond this vast whole (whose area is moreover much larger than indicated by most of the geographical maps in circulation, which sometimes divide by three or four the size of the continent). 0%, excluding the very special case of Equatorial Guinea, compared to only 2.2% for the rest of sub-Saharan Africa). Due to its geographical and linguistic proximity, its dynamism and its greater stability, French-speaking sub-Saharan Africa was thus the starting point for the international expansion of Moroccan companies, which were thus able to gain in size and experience, before being able to then extend beyond this vast whole (whose area is moreover much larger than indicated by most of the geographical maps in circulation, which sometimes divide by three or four the size of the continent). 0%, excluding the very special case of Equatorial Guinea, compared to only 2.2% for the rest of sub-Saharan Africa). Due to its geographical and linguistic proximity, its dynamism and its greater stability, French-speaking sub-Saharan Africa was thus the starting point for the international expansion of Moroccan companies, which were thus able to gain in size and experience, before being able to then extend beyond this vast whole (whose area is moreover much larger than indicated by most of the geographical maps in circulation, which sometimes divide by three or four the size of the continent).
A real risk of Algerian bankruptcy by 2029
While Morocco has seen its foreign exchange reserves increase steadily over the past few years, reaching a historic high of 35.5 billion dollars at the end of March 2023 (against only 19 billion at the beginning of 2014, and thanks to the robustness of its economy diversified), Algeria’s heavy dependence on hydrocarbons led to a collapse of the country’s foreign exchange reserves, in parallel with an explosion of its indebtedness. And this, in an international context marked by the downward trend in the price of hydrocarbons, which are increasingly being replaced by renewable energies. Indeed, foreign exchange reserves fell from 193 billion dollars at the beginning of 2014 to 45.3 billion at the end of 2021, i.e. an annual decrease of 18. 5 billion dollars on average over this eight-year period (before rising very temporarily to 66.1 billion at the end of March 2023, following the exceptional and brief rise in the price of hydrocarbons after the outbreak of the war in Ukraine). And despite the significant restrictions imposed on imports, which now stand at around 40 billion dollars a year (38 billion in 2022, against 58 billion in 2014), foreign exchange reserves have still continued to fall by 13.2 billion dollars per year, on average, over the second half of the period, between the beginning of 2018 and the end of 2021 (compared to 23.7 billion during the first half).
At the same time, and according to the latest data provided by the IMF, the country’s public debt has increased considerably, from just 7.7% of GDP at the end of 2014 to 62.8% at the end of 2021 (before falling, temporarily, to 52.4% at the end of 2022). While Algeria was the least indebted country of the 54 countries on the continent in 2014, it has thus moved to 26th place among the most indebted African countries in just seven years, and should soon be part of the 10 most indebted countries, according to forecasts in this area (especially since it has one of the most abysmal budget deficits in the world, having reached 12.3% of GDP in 2022, according to the World Bank).
Indeed, and because of a still embryonic diversification in comparison with the Maghreb neighbours, the economic situation of the country will continue to worsen, given the return of the price of hydrocarbons to the level which was theirs before the war in Ukraine (and even globally below), and the persistent downward trend in their price, due to the rise of renewable energies. These are also experiencing such a boom that non-fossil sources, driven by solar and wind power, have just broken a new record by being the source of no less than 39% of the world’s production of electricity in 2022, and that the global demand for fossil fuels for this sector should even begin to decline this year, despite the double economic and demographic growth in the world.
Furthermore, it should also be noted that the downward trend in the price of hydrocarbons is also supported by the increase in world supply, with the appearance of new large producers (Canada, Brazil, Guyana, etc.) and the multiplication small producing countries (like Senegal, from this year 2023). The rise of renewable energies and the parallel increase in the world supply of hydrocarbons are precisely the reasons that explain the loss of influence of OPEC+, whose latest decisions to reduce production have had absolutely no impact on prices (returning each time to their initial level, only a few days later).
In the absence of profound economic reforms, drawing inspiration in particular from its French-speaking neighbors in the Maghreb, Algeria’s foreign exchange reserves should therefore start to fall again at a rate of several billion dollars per year. Indeed, the timid diversification policy in progress could only be enough to cover the future decline in revenues from hydrocarbons, resulting both from the lasting fall in their price and the drop in the country’s exports in this area (continued increase in domestic consumption). At the same time, it will be difficult to further reduce the level of imports, given the extent of the restrictions already imposed and the country’s population growth.
With foreign exchange reserves reaching 66.1 billion dollars at the end of March 2023, and assuming an annual decline reduced to only 10 billion dollars per year, against 13.2 billion over the period 2018-2021 (and which could require starting to reduce a number of social benefits), Algeria should then only be able to cover four months of imports in mid-2028, i.e. the level from which a country is considered to be close to bankruptcy (as is currently Kenya, which can no longer pay all its civil servants). This situation, which seems difficult to avoid, given the modest diversification policy currently being implemented, but also the fact that it is unlikely that Algeria can achieve in just five years what Tunisia and Morocco have taken many years to put in place, would then force the country to turn to international financial institutions and to implement painful reforms, in order to avoid complete bankruptcy the following year, and a scenario similar to that experienced by Venezuela, another major hydrocarbon-producing country and ally of Algeria. Indeed, and despite considerable natural wealth, this South American country had completely collapsed in the middle of the last decade, causing the exodus of more than 6 million people since 2015, i.e. one fifth of the Venezuelan population. and one of the greatest humanitarian disasters in history. would then force the country to turn to international financial institutions and implement painful reforms, in order to avoid complete bankruptcy the following year, and a scenario similar to that experienced by Venezuela, another large country hydrocarbon producer and ally of Algeria. Indeed, and despite considerable natural wealth, this South American country had completely collapsed in the middle of the last decade, causing the exodus of more than 6 million people since 2015, i.e. one fifth of the Venezuelan population. and one of the greatest humanitarian disasters in history. would then force the country to turn to international financial institutions and implement painful reforms, in order to avoid complete bankruptcy the following year, and a scenario similar to that experienced by Venezuela, another large country hydrocarbon producer and ally of Algeria. Indeed, and despite considerable natural wealth, this South American country had completely collapsed in the middle of the last decade, causing the exodus of more than 6 million people since 2015, i.e. one fifth of the Venezuelan population. and one of the greatest humanitarian disasters in history. and a scenario similar to that experienced by Venezuela, another major hydrocarbon-producing country and an ally of Algeria. Indeed, and despite considerable natural wealth, this South American country had completely collapsed in the middle of the last decade, causing the exodus of more than 6 million people since 2015, i.e. one fifth of the Venezuelan population. and one of the greatest humanitarian disasters in history. and a scenario similar to that experienced by Venezuela, another major hydrocarbon-producing country and an ally of Algeria. Indeed, and despite considerable natural wealth, this South American country had completely collapsed in the middle of the last decade, causing the exodus of more than 6 million people since 2015, i.e. one fifth of the Venezuelan population. and one of the greatest humanitarian disasters in history.
