For the first time in six years, Algeria’s trade balance is once again positive thanks to a rise in hydrocarbon prices. Can the country emerge from the economic crisis? Will this rise in prices benefit Algerians? To analyze.
This is a first since 2014. The Algerian trade balance is once again positive. At least that is what the Algerian Ministry of Commerce is planning. Hydrocarbon prices are on the rise again. The price of a barrel of oil listed in London, Brent, exceeds 85 dollars. And its gas equivalent is trading at over $150.
Algiers is finally breathing. For the year 2021, the country is expected to record according to Algerian customs data a trade surplus of more than five billion dollars. This year 2021 exports will be greater than imports. In 2020, in the midst of the global coronavirus epidemic, the price of a barrel had fallen to $ 9. The country’s GDP has fallen by more than 40% since 2014. The stakes are vital for the country.
Gas and oil exports represent just over 98% of Algerian exports. Export revenues constitute a little over 60% of the Algerian state’s budgetary revenues. Camille Sari, economist
The health of the Algerian economy depends heavily on the level of hydrocarbon prices, notes the Algerian economist, Camille Sari. Algeria is the second-largest oil producer in Africa.
Algiers is also the seventh-largest gas exporter in the world. “Oil and gas exports represent a little over 98% of Algerian exports. Export revenues constitute a little over 60% of the Algerian state’s budgetary revenue. Without a high price per barrel of oil or the price. gas, the Algerian government must draw on its reserves to pay the salaries of civil servants or social spending, “ describes the economist.
For the first time in six years, the country’s trade balance is once again positive thanks to the rise in hydrocarbon prices.
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From 2005 until 2014, except during the 2008-2009 crisis, the price of a barrel reached 100 dollars. The Algerian state has been able to hoard tens of billions of dollars thanks to these high prices. Its foreign exchange reserves were estimated at more than 200 billion dollars in 2014. Today, they do not exceed 30 billion dollars.
“The Algerian regime depends on this oil windfall. This is what allows it to buy a form of social peace. Under the presidency of Bouteflika (1999-2019), the government had donated part of the profits from the oil rent in the form of subsidies, in particular on essential products. This generous policy was then stopped with the fall in the prices of the barrel and of gas”, explains Camille Sari.
The Algerian regime depends on this oil windfall. This is what allows him to buy a form of social peace. Camille Sari, economist
“The bonuses of university professors depend, for example, on the budgetary resources of the State. With the fall in oil prices, these bonuses have ceased to be paid”, explains Camille Sari. “The purchasing power of many Algerians depends on state revenues, which are themselves drawn from oil and gas resources,” he continues.
A social policy linked to the price of the barrel
In 2007, hydrocarbon exports amounted to just over $ 80 billion. In 2020, this figure did not exceed 20 billion. The Algerian Ministry of Commerce is betting for the year 2021 on nearly 40 billion dollars of exports.
Sonatrach is the national company that exploits and exports the country’s gas and oil resources.
Can the Algerian state get by, resume a more generous social policy, and boost wages? Nothing is less certain according to Camille Sari. The domestic consumption of gas and oil continues to increase due to the country’s population growth.
“Algerians consume a little over 50% of the country’s hydrocarbon production. And this share in the years to come should not stop increasing. Gas and oil production cannot keep up with the increase. of domestic demand, despite the efforts of the government”, specifies the economist. The shale gas mirage did not last long. The exploitation projects are now abandoned.
In 2015 in In Salah, a city in the Algerian Sahara, the Algerian authorities launched the exploitation of its first shale gas well by hydraulic fracturing. The inhabitants of the region were opposed to it for fear of pollution of the water tables.
Between the increase in domestic consumption and the stagnation of gas and oil production, the volume of hydrocarbon exports is decreasing mechanically. The Algerian state must always count on a higher price per barrel of oil to get by on the budgetary level.
The point of budgetary equilibrium around a barrel price of 70 dollars
In fact, in the 2000s, the government succeeded in stabilizing the country’s economy with the price of a barrel of oil around 50 dollars according to Camille Sari. “Today the point of equilibrium is around a price of 70 dollars”, estimates the economist.
Can the improvement in oil and gas prices last, for the greater benefit of the Algerian state? Can the price of a barrel stay above 80 dollars? Françis Perrin, research director at IRIS in Paris, closely follows oil prices and is cautious.
Beyond two years, it is very complicated to predict what the price level of a barrel of oil will be. No one could predict such a drop in hydrocarbon prices in 2020. Françis Perrin, researcher at Iris, specialist in oil prices.
“The prices of a barrel of oil can remain at a high level for two years. We are in a context of economic recovery. But beyond two years, it is very complicated to predict what the level of the price of a barrel of oil will be. No one could have predicted such a drop in hydrocarbon prices in 2020″, specifies Francis Perrin.
How to escape the fluctuations in barrel prices? “There is only one way. You have to diversify your economic activities and get out of oil revenues,” said this researcher, a specialist in hydrocarbons.
With a barrel of more than 100 dollars in the 2000s, the Algerian power had the necessary leeway to transform the country’s economy according to Camille Sari. “But nothing has been done. The country imports its basic goods and exports only fossil fuels,” notes the economist bitter.
