Tuesday 25 February 2025 
✏️ BY: Dr. Hana Saada
Algiers, Algeria | June 12th, 2024 — Algeria has set a bold target to elevate its Gross Domestic Product (GDP) to $400 billion by the end of 2026 or early 2027. This ambitious goal requires a strategic approach and significant economic reforms. In an in-depth interview with “L’Algérie Aujourd’hui” news website, Professor of Economics Brahim Guendouzi provides a comprehensive analysis of the pathways to achieving this target, elucidating the intricacies of GDP as an economic indicator and the methodological changes that will support this endeavor.
Five Strategic Pathways to Economic Growth
In 2023, Algeria’s GDP at current prices was approximately $240 billion, with a growth rate of 4.1% according to the latest World Bank report. To achieve the $400 billion target within a three-year horizon, Professor Guendouzi outlines five critical assumptions:
1. Stabilization of the Oil Market: A stable oil market is paramount. Algeria’s economy heavily relies on external revenues from the export of hydrocarbons such as oil, natural gas, and condensates. Ensuring remunerative prices for these exports is essential for economic stability and growth.
2. Sustaining Economic Growth: The country must maintain an annual economic growth rate of around 4%, continuing the positive trajectory from 2023. This sustained growth is vital to gradually increasing the GDP.
3. Activation of Investment Projects: Both registered investment projects with the Algerian Agency for the Promotion of Investment (Aapi) and state-led structural projects, especially in mining and petrochemicals, need to enter production phases. The successful realization of these projects will significantly boost economic output.
4. Advancement in Digitalization: The ongoing digitalization efforts across various sectors are expected to yield substantial benefits. This process will enhance data collection, integration, and harmonization, leading to more efficient economic activities and better policy formulation.
5. Updating the GDP Base Year: A significant methodological change involves updating the reference year for GDP calculation from 2001 to 2011. This update is part of continuous improvements in establishing national accounts, reflecting structural economic changes and socio-economic developments more accurately.
Understanding GDP as an Economic Indicator
Professor Guendouzi explains that GDP is a comprehensive aggregate of national accounting, derived from the concept of value added. It represents the wealth created by economic activities, calculated as the difference between the value of production and the intermediate goods and services used in production. The GDP thus sums up all gross value added by resident production units, including those owned by foreigners, and adds taxes minus subsidies on products.
There are three approaches to determine GDP at current prices: the production approach, the income approach, and the expenditure approach. The production approach decomposes GDP into market production, valued through prices, and non-market production, valued based on production costs. Notably, domestic production for self-consumption and informal sector activities are excluded from GDP calculations, as they do not appear in official statistics. GDP per capita is also calculated to estimate the standard of living and facilitate international comparisons.
While GDP measures economic growth, it has limitations in characterizing a country’s development level. Therefore, the Human Development Index (HDI), calculated by the United Nations Development Programme (UNDP), complements GDP by considering income, health, and education dimensions.
Methodological Changes in GDP Calculation
The methodological framework for GDP calculation is guided by the 2008 System of National Accounts (SNA 2008), developed by the United Nations with input from the IMF, World Bank, and OECD. Algeria’s National Statistics Office (ONS) uses this standard for economic statistics, with the GDP calculated against a base year. Until 2022, the base year was 1989, but it was updated to 2001, reflecting significant economic transformations between these years.
The recent rebasing allowed the ONS to produce a new series of economic accounts from 2001 to 2022, aiding public policy formulation and economic analysis. Starting this year, the base year will shift from 2001 to 2011, producing a series from 2011 to 2024. This change ensures compliance with SNA 2008 recommendations and better captures structural changes and new socio-economic phenomena.
Forecasts and Regional Economic Position
The IMF’s latest forecasts indicate that Algeria is not far from achieving the $400 billion GDP target at current prices. It’s important to distinguish between GDP calculated in current prices and real terms, adjusted for price variations. The real GDP measures actual economic growth, excluding price changes’ influence, while nominal GDP reflects current market values.
In 2023, Algeria ranked as the third-largest economy in Africa, behind South Africa and Egypt. The country’s economic potential and strategic geographic position in Africa and the Mediterranean are significant advantages. However, the heavy reliance on hydrocarbons remains a vulnerability, especially in the face of volatile international oil markets. If Algeria continues efforts to diversify its economic structure and strengthen its agricultural, industrial, and energy sectors through productive investments, it stands a good chance of improving its GDP ranking both in Africa and the Mediterranean region.
In conclusion, reaching a GDP of $400 billion by 2027 is an ambitious yet attainable goal for Algeria. It requires stable oil prices, sustained economic growth, successful investment projects, continued digitalization, and methodological improvements in GDP calculation. With these strategies, Algeria can bolster its economic position and pave the way for sustainable development.
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