Despite elevated hydrocarbon revenues, the Algerian government continues to struggle to balance out its budget and is heading towards a similar path that preceded the 2014-16 crisis. 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 into 2026 to -12.2%. 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, according to the IMF.

On the external front, Algeria’s current account balance has gone down to negative levels at -3.7% of GDP in 2025, after four years of surplus. Imports surged by 25% in H1 2025 from the previous year, especially from greater food, machinery and transport equipment imports. Export earnings slowed due to low 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 2025 the government faced renewed criticism over arrests and prosecutions while tensions with France escalated into a diplomatic tit-for-tat (including high-profile press-freedom controversies) and Kabylie-related developments kept the sovereignty/identity debate politically charged. The 2024 presidential elections in Algeria reaffirmed President Tebboune’s leadership, though the 94% electoral win was met with skepticism, with some viewing it as a "show election." A significant shift has been the expanded role of the military following Tebboune’s announcement of a policy change allowing troop deployments abroad with parliamentary approval. 

The current economic environment caused by extended period of low oil prices could have substantial social and political implications without meaningful reform or access to external financing by the regime. The 2014-16 period of economic stagnation was followed by the 2019 collapse of former President Bouteflika’s regime. Recent months have seen a resurgence of organized protests led by youth movement, inspired by the 2019 protest and ongoing youth movements across South Asia and Africa, as in Morocco, for example. Protestors have demanded the end of corruption and youth unemployment, as well as and health system standards. As Algeria’s rentier economy faces mounting pressure from declining gas and oil reserves. Without new discoveries or a shift in the economic model, social tensions could resurface as the economy deteriorates. 

Meanwhile, the business landscape remains heavily influenced by bilateral relations and personal connections, despite the government’s ongoing anti-corruption drive. Foreign companies, particularly those with no links to former President Abdelaziz Bouteflika’s circle, are unlikely to face significant risks. Italy has become Algeria’s closest European ally, particularly in the energy sector, where Italian firms such as ENI, Saipem, Ansaldo Energia and Bonatti play leading roles.