ALGERIA

RISK RATING
Elevated
Default High Risk Score 5.80
Normal Average 3.93
Weighted Average 3.77
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

The protracted absences of Algeria’s president in 2020 and 2021 have undermined the government’s political legitimacy and stalled the reform agenda that was meant to boost economic diversification and halt the depletion of foreign reserves. The new political order remains factionalised and ideologically divided, which is confusing the policy framework on key issues such as reaching out to the private sector and enticing foreign investment into a long-closed economy. The state-dominated economy is in freefall, forcing the government to tap into its usually healthy foreign exchange reserves. The renewed dominance of the military also poses discrimination and reputational risks for new entrants into Algeria. The Hirak protest movement may be dampened but is far from collapsed, indicating that fresh unrest is likely in 2021 as socio-economic grievances mount.

  • The 2019 political transition has kept the military status quo in place and allowed Algeria‚Äôs generals to create an Egypt-style military-industrial complex to boost economic diversification while also raising corruption risks for foreign investors. Stringent curfew and lockdown measures will also favour the military hierarchy which governs alongside a civilian administration in the powerful Haut Conseil de S√©curit√©, a senior council of military and civilian leaders which has been resurrected. Regardless of any new outreach to the private sector and foreign investors, the status quo in Algeria remains unchanged and poses serious contract frustration and discrimination risks. The so-called ‚Äėpouvoir‚Äô has been reshuffled under Chief of Staff Major General Sa√Įd Chengriha, who has been busy replacing factional rivals.
  • The Hirak protest movement remains far from collapsed and retains significant capacity for public mobilisation. Since its inception in February 2019, El Hirak has largely functioned as a reactive force, manifesting public dissatisfaction with Algeria‚Äôs power structures in the form of protests, and articulating broad demands for transformation in key areas. with the onset of the COVID-19 pandemic, El Hirak turned its attention from organising street protests to establishing a solidarity network to alleviate the accompanying economic and social fallout. This effort has sustained connections between members/participants and has potentially enhanced organisational efficiency. Opposition forces are also organising via social media to create new structures that could allow El Hirak to return to the political scene strengthened once prohibitions on gatherings have been lifted.
  • The economic crisis in Algeria has been exacerbated by weak and confused policy management. Algeria‚Äôs non-hydrocarbon exports are equivalent to around 2 percent of its total exports, meaning it is one of the most hydrocarbon-dependent countries in the world. Worryingly, foreign exchange reserves have dropped to just USD 44 billion, from USD 200 billion in 2014 when the oil and gas dependent economy still fared well. With its reserves depleted, the government has been forced to devalue the currency, provoking high inflation rates amid soaring austerity, as it attempts to balance the public accounts. A volatile global oil price outlook for 2021 and the prospect of Algerian oil reserves drying up by 2050 do not bode well for an economic recovery in 2021.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
3.6
Expropriation, Nationalisation, Confiscation & Deprivation
3.2
Contract Frustration & Breach
4.8
Taxation
2.5
Bribery & Corruption
4.0
Regulatory Burden
4.0
Strikes, Riots & Civil Commotion
4.2
Security
4.2
Sovereign Default
3.0
Economic Volatiliy
5.8

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