During the first half of 2024, robust economic growth continued, supported by non-extractive sectors and dynamic investment. After an acceleration to 4.1 percent in 2023, GDP growth slowed slightly in the first half of 2024 (+3.9 percent y-oy), supported by dynamic non-extractive growth. Investment growth accelerated, stimulating imports, while private and government consumption remained robust. Nightlights suggest that non-extractive growth was driven by the North-Center region. Non-extractive GDP growth was broad-based and supported by resilient agricultural output, but extractive GDP remained stable during H1-2024 (+1.0 percent y-o-y) after another reduction in Algeria’s crude oil production quota in January and lower European gas demand.

Inflation decelerated markedly in H1-2024 as fresh food prices stabilized, import prices moderated, and the exchange rate remained stable. After reaching 9.3 percent in 2022 and 2023, inflation fell to 4.3 percent during the first nine months of 2024 following the stabilization of fresh food prices starting in H2-2023 after increasing rapidly. Lower inflation was also supported by resilient agricultural output, the lifting of meat import restrictions, as well as a stable exchange rate after the Bank of Algeria interrupted fourteen years of depreciation in mid-2022. Monetary policy remains accommodative, with the policy interest rate remaining unchanged since May 2020, and money supply growth and credit to the private sector accelerated during 9m-2024. 

Lower hydrocarbon exports, combined with higher imports and rising public spending, brought the current account back to balance and increased the fiscal deficit. After the current account surplus narrowed markedly to 2.3 percent of GDP in 2023, it reached balance in H1-2024 as export prices and volumes declined, while import volumes remained elevated, stimulated by investment. Foreign exchange reserves increased slightly, reaching about 16.2 months of imports of goods and services at endSeptember 2024. In addition to lower hydrocarbon revenues, increasing current and capital expenditures, including the last of three waves of public sector wage increases, are contributing to an expansion in the fiscal deficit, after it reached 5.2 percent of GDP in 2023. The deficit was mainly financed through oil savings, and therefore public debt increased moderately.