Despite elevated hydrocarbon revenues, especially from gas, the Algerian government continues to struggle to balance out its budget and is heading towards a similar path that preceded the 2014-16 crisis, demonstrating the failures of the economic model of the current regime. Algeria’s fiscal balance stood at –11.5% in 2025, the largest of any oil exporter in the MENA region, and it is expected to increase closer to -12% in 2026. The debt-to-GDP ratio is projected to have increased by 12% y/y in 2025, and it expected to reach 80% of GDP by 2030.

On the external front, Algeria’s current account balance has gone down to negative levels at -3.7% of GDP in 2025, and it is projected to slightly improve in 2026 to -3.5%. Imports surged by 25% in H1 2025 from the previous year, especially from greater food, machinery and transport equipment imports and the depreciation of the Dinar. Export earnings slowed due to lower oil prices. As a result, Algeria introduced new import restrictions in the summer of 2025 as FX from the central bank began declining again after having increased from 2021 lows. While non-hydrocarbon exports increased by 12% y/y they remain too small at around 4% of total exports.

In an unusual move amid low liquidity, Algeria tapped the African Development Bank to finance the construction of a new railway line that should connect the capital Algiers to southern regions with potential for mineral extraction, part of the diversification push. Algerian external debt only equals 3% of GDP (with a large part being IMF SDRs allocation). This opens the door to potential agreements with other international lenders, both multilateral — especially from the BRIC’s development bank as the latest IMF financing program dates back to 1995 — and bilateral, as Algeris enjoys strong links with Beijing. In September 2025, Algeria also announced the issuance of its first sukuk bond, aiming to raise USD2.3bn with domestic investors.

Algeria’s business environment remains challenging, shaped by slow economic diversification and a state-dominated financial system. The IMF highlights that strong links between the state, state-owned enterprises (SOEs) and public banks crowd out private sector credit, especially when government financing needs rise. High non-performing loans (NPLs), at over 20% of total loans, further limit banks’ willingness to lend to private businesses, reinforcing the close ties between the sovereign and the banking sector.

While the government has introduced reforms, including a new Investment Law, implementation risk is high, and these measures have not yet significantly improved competition or foreign direct investment (FDI) flows. Regulatory uncertainty, shifting policies and protectionist measures continue to deter foreign investors. Despite recent progress, Algeria’s business climate is still characterized by heavy state intervention, limited access to credit for private firms and unpredictable regulations. Sustainable improvement will require deeper reforms to governance, competition and the financial sector to unlock private investment and foster a more dynamic, diversified economy.

In September 2025, Prime Minister Sifi Ghrieb was appointed to form a new government following elections in the Upper House in the spring of 2025. These developments are not expected to bring significant changes to the regime, especially after the 2024 election reappointed President Tebboune with 94% of the vote. Social dissent was suppressed in 2025, particularly after youth-oriented movements attempted to mobilize protests, following similar protests movements across Africa and South Asia.

While macroeconomic growth has been strong since 2021, inequalities in Algeria persist. The latest official unemployment figures were reported just above 11%, but it is estimated that between 30% and 40% of the total labor force is informal. Women's participation in the labor force is even lower, and significant disparities exist between rural and urban areas. Youth frustration remains high due to a lack of opportunities and higher youth unemployment rates, which contribute to high levels of brain drain given the high literacy rates.

Relations with France remain complex. Throughout 2025, relations experienced significant strain, with diplomatic spats, reciprocal expulsions of diplomatic staff, and disputes over issues like migration cooperation and the 1968 migration agreement that historically governed mobility between the two countries. In 2026, these complex dynamics are expected to continue. Internationally, Algeria positions itself as an autonomous regional power with strong historical ties to the global south. In recent years, Algeria’s ties with China have grown significantly; imports exceed USD 11 billion, and a strategic partnership was signed encompassing trade, infrastructure, and industrial investment. Algeria’s large and resource-rich geography could offer great opportunities in the mining sector, especially in the commodities needed for the energy transition and AI race. However, concerns about the business environment may deter foreign firms from participating, potentially hindering economic activity in the country.