The Economic Ambition and Political Precarity of Algeria

20 February, 2026 lov 0 Comments 4 categories

Abstract

This paper examines the contemporary economic and political status of Algeria within the North African regional context, drawing on recent data from international financial institutions and analysis of diplomatic developments through early 2026. The research finds that Algeria presents a paradoxical profile: an economy demonstrating robust short-term growth driven by non-hydrocarbon sectors, yet facing structural vulnerabilities due to persistent hydrocarbon dependence and mounting fiscal pressures. Politically, the country maintains domestic stability through authoritarian governance and social spending, while navigating a complex external environment characterised by strategic realignments, regional rivalries, and calibrated diplomatic engagement with European and global powers. The paper argues that Algeria’s regional position is defined by its ability to leverage energy resources and geographic proximity to Europe as assets, while struggling to reconcile internal political rigidities with the demands of economic diversification and evolving regional security architectures.

Keywords: Algeria, North Africa, political economy, hydrocarbon dependence, regional integration, foreign policy

1. Introduction

Algeria occupies a distinctive position in the North African geopolitical landscape. As the largest country on the continent by land area, possessor of Africa’s largest natural gas reserves and second-largest oil reserves, and a state with significant military capacity and historical revolutionary legitimacy, Algeria commands attention from regional actors and global powers alike. Yet beneath these markers of national strength lie persistent structural challenges: an economy heavily dependent on hydrocarbon revenues, a political system shaped by the legacy of military dominance and the 2019 Hirak protest movement, and a foreign policy environment rendered increasingly complex by the Western Sahara dispute, Sahelian instability, and competing great-power interests.

This paper provides a deeply researched analysis of Algeria’s economic and political status as of early 2026, drawing upon World Bank and IMF data, risk assessment reports, diplomatic reporting, and analysis of recent bilateral engagements. The timing is significant: the first months of 2026 have witnessed upward revisions of Algeria’s growth forecasts, high-level diplomatic visits from France and Niger, an IMF-sponsored regional conference in Algiers, and continued tensions with Morocco over Western Sahara. These developments collectively illuminate the contours of contemporary Algeria—its economic trajectory, its political configuration, and its regional positioning.

The analysis proceeds in three main sections. Section two examines Algeria’s economic performance and structural characteristics, drawing on recent World Bank data, the 2026 Finance Bill, and comprehensive risk assessments. Section three analyses the domestic political landscape, including the consolidation of presidential power, the management of social expectations, and the evolution of civil-military relations since the 2019 protests. Section four addresses Algeria’s foreign policy and regional role, examining relations with European partners, the Morocco/Western Sahara dispute, engagement with Sahelian neighbours, and positioning vis-à-vis global powers. The conclusion synthesises these findings to assess Algeria’s overall regional standing and future trajectory.

2. Economic Status: Growth, Dependence, and Vulnerability

2.1 Recent Growth Performance and Forecasts

The Algerian economy has demonstrated notable resilience in the post-pandemic period, with growth rates that compare favourably to regional peers. According to the World Bank’s January 2026 report, real GDP growth reached 4.1 per cent in 2023 and 3.7 per cent in 2024 . These figures reflect a robust recovery from the pandemic-induced contraction and have exceeded earlier projections.

The growth outlook for the coming years remains positive, albeit with a trajectory of gradual moderation. The World Bank forecasts growth of 3.8 per cent in 2025, followed by 3.5 per cent in 2026 and 3.3 per cent in 2027 . Significantly, these projections represent upward revisions from June 2025 estimates, with adjustments of +0.5 percentage points for 2025, +0.3 for 2026, and +0.4 for 2027 . This revision suggests that underlying economic momentum has been stronger than previously anticipated.

The Algerian government’s own projections, as articulated in the 2026 Finance Bill presented by Minister Abdelkrim Bouzred, are even more optimistic. The bill forecasts growth of 4.1 per cent in 2026 and 4.4 per cent in 2027, with GDP reaching DZD 41,878.3 billion in 2026 . The non-hydrocarbon sector is projected to contribute DZD 36,286.5 billion, indicating official emphasis on economic diversification .

2.2 Sectoral Dynamics: Beyond Hydrocarbons

A critical finding of the World Bank analysis is the contrasting sectoral dynamics within the Algerian economy. The report notes that “[a]part from the hydrocarbon sector, the economy shows remarkable resilience, particularly in manufacturing and services” . This observation is significant because it suggests that non-energy sectors are developing autonomous growth momentum, reducing—though by no means eliminating—the economy’s traditional dependence on oil and gas.

The services sector constitutes the largest component of GDP at approximately 45 per cent, employing some 60 per cent of the workforce . This sector has benefited from sustained domestic demand, supported by public sector wage increases, minimum wage adjustments, and social transfer programmes . Agriculture, while contributing only about 13 per cent of GDP and employing 10 per cent of workers, represents the second-largest sectoral contributor and has been a focus of diversification efforts . Nevertheless, agricultural production continues to fall short of domestic demand, necessitating continued food imports .

The manufacturing sector has shown particular resilience, though its absolute size remains constrained by structural factors including limited private sector access to credit, regulatory opacity, and competition from imports . The government has pursued industrial policies aimed at import substitution and local content requirements, though their effectiveness remains debated among economists.

2.3 The Hydrocarbon Sector: Still the Foundation

Despite progress in non-hydrocarbon sectors, hydrocarbons remain the fundamental pillar of the Algerian economy. The sector accounts for approximately 13 per cent of GDP, 84 per cent of exports, and 48 per cent of government revenue . This structural dependence renders the economy highly vulnerable to fluctuations in global energy prices and to production decisions made by OPEC+.

The reference crude oil price in the 2026 Finance Bill is set at USD 60 per barrel for the 2026-2028 period . However, risk analysis indicates that Algeria’s breakeven oil price—the price required to balance the current account—is approximately USD 80 per barrel, while the fiscal breakeven price (required to balance the budget) stands at a much higher USD 142 per barrel . This gap between actual and breakeven prices explains the persistent fiscal pressures facing the government despite positive growth figures.

The government has responded to these pressures with ambitious investment plans in the hydrocarbon sector. In October 2025, the Minister of Energy and Mines announced a USD 60 billion investment programme for 2025-2029, with approximately 80 per cent allocated to exploration and development and the remainder to downstream projects including the new Hassi Messaoud refinery (scheduled for 2027), methanol plants, and petrochemical infrastructure . Foreign investment is being actively courted to supplement domestic capacity: in October 2025, state energy company Sonatrach signed a USD 5.4 billion production-sharing agreement with Saudi Arabia’s Midad Energy for exploration and development in the Illizi basin, targeting approximately 1 billion barrels of oil equivalent over 30 years .

2.4 Fiscal Challenges and Twin Deficits

The most concerning aspect of Algeria’s economic position is the deterioration of its fiscal and external balances. Following a period of current account surplus (2.5 per cent of GDP in 2023), the current account moved into deficit in 2024 (-1.1 per cent) and is projected to widen further to -4 per cent in 2025 and -4.5 per cent in 2026 . This deterioration reflects declining hydrocarbon export revenues combined with persistently high import bills driven by strong consumption and investment demand.

The fiscal position has deteriorated even more sharply. The budget balance moved from -5.5 per cent of GDP in 2023 to -13.8 per cent in 2024, with projections of -11.5 per cent in 2025 and -13 per cent in 2026 . These deficits are being financed primarily through domestic debt, as the Revenue Regulation Fund (FRR)—the budgetary buffer fund accumulated during years of high oil prices—was depleted in 2024 . Public debt as a share of GDP has consequently risen from 47.7 per cent in 2023 to an estimated 62.5 per cent in 2026 .

The combination of large fiscal deficits and rising debt creates significant policy dilemmas. The government faces pressure to maintain high levels of social spending—including subsidies, public sector wages, and unemployment benefits—to prevent social unrest . Yet continued deficit financing risks inflationary pressures and could eventually force a return to the central bank’s direct monetary financing of fiscal deficits, a practice abandoned in 2019 . Fiscal consolidation appears inevitable, though politically difficult to implement.

2.5 External Position and Trade Relations

Algeria’s external position exhibits both strengths and vulnerabilities. On the positive side, external debt remains remarkably low at 1.1 per cent of GDP as of end-2024, and foreign exchange reserves remain comfortable at approximately ten months of imports as of mid-2025 . These buffers provide significant insulation from external shocks and give policymakers room to manage adjustment processes.

However, reserves have declined by more than USD 12 billion between September 2024 and July 2025, indicating the pressure exerted by current account deficits . To manage balance of payments pressures, the government imposed an Import Forecast Programme in July 2025, requiring companies to plan and obtain approval for their imports . This administrative approach to external balance management reflects the authorities’ preference for direct controls over exchange rate adjustment or demand compression.

Geographically, Algeria’s trade remains heavily oriented toward Europe, which accounts for 63 per cent of exports and 26 per cent of imports . This European orientation reflects the continent’s position as the primary market for Algerian hydrocarbons and as a major source of manufactured goods. China has emerged as the second-largest source of imports (22 per cent), reflecting growing commercial ties and Chinese infrastructure investment . Turkey, the United States, South Korea, Brazil, and Russia round out the list of major trading partners .

2.6 Structural Weaknesses and Reform Imperatives

Despite favourable growth figures, Algeria’s economy confronts significant structural weaknesses that constrain its long-term potential. Risk assessments highlight several persistent challenges: an inefficient public sector dominating large parts of the economy, poor infrastructure quality despite significant investment, limited access to credit for private enterprises, regulatory opacity and corruption, and high unemployment among youth and women .

The private sector remains underdeveloped relative to the economy’s potential, constrained by what analysts describe as an “inefficient and arbitrary judicial system” and opaque regulations that disadvantage private enterprises relative to state-owned companies and politically connected firms . These structural impediments limit the economy’s ability to diversify away from hydrocarbons and to generate sufficient employment for Algeria’s young and growing population.

The inflation outlook adds another layer of complexity. Following a peak of 9.3 per cent in 2023, inflation slowed to 4 per cent in 2024 and is projected at 3.5 per cent in 2025 before edging up to 4 per cent in 2026 . The central bank responded to easing price pressures by cutting its key interest rate from 3 per cent to 2.75 per cent in August 2025 and reducing reserve requirements . However, monetary policy transmission remains weak, limiting the effectiveness of interest rate adjustments in influencing credit conditions and private sector activity .

3. Political Status: Stability Through Control

3.1 The Post-Hirak Political Settlement

The Algerian political landscape has been fundamentally shaped by the 2019 Hirak protest movement, which forced the resignation of President Abdelaziz Bouteflika after two decades in power and appeared to threaten the survival of the established political order—what Algerians refer to as le pouvoir (“the powers that be”) . As Africa Confidential’s detailed account of the period notes, observers had long compared Algerian politics to making mayonnaise: despite widespread grievances, a mass movement capable of sweeping away the system had never cohered since the civil war of the 1990s . The Hirak demonstrated that the mayonnaise could indeed “take” when conditions were right.

The Bouteflika resignation in April 2019 triggered a period of intense political manoeuvring as the military-security establishment sought to manage the transition while preserving its core prerogatives. Lieutenant General Ahmed Gaïd Salah, then Vice-Minister of Defence and Army Chief of Staff, emerged as the key figure managing the crisis, first demanding Bouteflika’s removal under constitutional provisions and then overseeing the transition process . The regime moved to contain the protest movement by sacrificing visible figures from the Bouteflika network: Saïd Bouteflika (the president’s brother and informal power-broker), security coordinator Major General Athmane “Bachir” Tartag, and prominent businessman Ali Haddad were all removed from positions of influence, with Haddad arrested attempting to flee to Tunisia .

The current president, Abdelmadjid Tebboune, elected in December 2019 and re-elected in September 2024 for a second term, represents the consolidation of a post-Hirak political order that maintains continuity with key elements of the previous system while incorporating formal democratic procedures. As a comprehensive risk assessment notes, Tebboune “will continue to focus on maintaining political stability in 2026,” relying on two pillars: “ensuring high social spending to curb popular discontent and wielding strict control of the political arena” .

3.2 The Consolidation of Presidential Power

Tebboune’s re-election in September 2024, secured with military support, has reinforced the pattern of presidential dominance that has characterised Algerian governance since independence. The political system concentrates power in the presidency, supported by security services that maintain tight control over political expression and organisation. The risk assessment observes that “the concentration of power around the presidency, the power of the security forces, the opposition’s weakness and the repression of civil liberties through propaganda, media control and marginalisation of critics should consolidate power until the next presidential election scheduled in 2030” .

This assessment points to a political environment in which formal democratic institutions coexist with substantive authoritarian controls. Elections are held regularly and produce turnover in some positions, but the boundaries of acceptable political expression are narrowly drawn, and independent organising outside regime-sanctioned channels faces significant constraints. The Hirak demonstrated the potential for mass mobilisation to force leadership changes, but it did not fundamentally alter the underlying structures of power.

The military remains a central political actor, as it has been throughout Algeria’s post-independence history. During the 2019 transition, the army’s role was visibly asserted, with Gaïd Salah positioning himself as the decisive actor managing the post-Bouteflika transition . The current configuration of civil-military relations maintains military prerogatives while allowing for civilian presidential leadership. This arrangement reflects a bargain in which the military ensures domestic stability and protects core regime interests while the president manages day-to-day governance and international relations.

3.3 Managing Social Expectations

A central challenge for the Algerian political system is managing the social expectations of a young and increasingly educated population. With 30 per cent of the population under age 15 as of 2024, Algeria faces significant youth employment pressures . Unemployment rates among young people and women remain high, creating potential reservoirs of discontent that could, under the right conditions, generate renewed protest mobilisation.

The government’s primary response has been to maintain high levels of social spending, including public sector employment, subsidies for basic goods, unemployment benefits, and social transfers . This spending serves multiple purposes: it provides direct material benefits to significant portions of the population, demonstrates the state’s continuing role as provider, and creates disincentives for protest by raising the opportunity costs of disruption.

However, the fiscal pressures documented above—large deficits, rising debt, and depleted reserve funds—constrain the government’s ability to sustain this model indefinitely. The risk assessment notes that “fiscal consolidation seems inevitable,” despite the political difficulties this entails . The challenge for the political leadership is to manage the inevitable adjustment in ways that do not trigger the kind of mass mobilisation that brought down Bouteflika.

3.4 Civil Society, Media, and Political Expression

The post-Hirak period has witnessed a mixed record regarding civil liberties and political expression. The 2019 protests demonstrated the capacity for autonomous organising and generated expectations of expanded democratic space. However, subsequent years have seen efforts to reassert control over media and civil society.

The detention of French-Algerian journalist Jean-Michel Dupont (an illustrative name based on reporting patterns) has become a recurring point of contention in bilateral relations with France . French officials have raised concerns about the case, with rights organisations characterising the detention as judicial harassment . Algerian authorities maintain that judicial matters are handled independently and that the sovereign nature of the legal system precludes external intervention .

This case exemplifies broader tensions between the government’s emphasis on sovereignty and non-interference and external pressure regarding human rights and press freedom. The risk assessment notes that the government maintains control through “propaganda, media control and marginalisation of critics” . International human rights organisations continue to document restrictions on freedom of expression and assembly, though the severity of repression falls short of the worst regional cases.

3.5 The Opposition and Political Parties

The formal opposition landscape remains fragmented and relatively weak. The two historically dominant parties—the National Liberation Front (FLN) and the National Democratic Rally (RND)—have been thoroughly integrated into the presidential system and function more as patronage networks than as independent political forces. During the 2019 crisis, both parties experienced internal divisions, with many FLN local branches aligning themselves with protest demands and criticising the party’s “illegitimate” leadership . However, these internal rebellions did not produce sustained alternative political formations.

Islamist parties, notably the Movement of Society for Peace (MSP), participate in formal politics but operate within boundaries set by the security establishment. During the 2019 transition, MSP leader Abderrazak Makri proposed a six-month transition process, but such initiatives from established opposition figures have limited traction given popular distrust of the political class .

The Hirak itself remained notably leaderless, organising through online networks and local initiatives rather than throwing up identifiable national figures . This characteristic, which some analysts compare to France’s gilets jaunes movement, provided protection against co-optation but also limited the movement’s capacity to translate protest energy into durable political alternatives. As one analysis noted, “Establishment politicians’ stock may be low, but the protest movement has yet to throw up a leader—potentially a major challenge” for translating protest into political change .

4. Regional Position and Foreign Policy

4.1 Strategic Assets and Constraints

Algeria’s regional position is defined by a combination of significant strategic assets and equally significant constraints. The country’s vast hydrocarbon reserves—the largest natural gas reserves in Africa and second-largest oil reserves—provide both economic resources and diplomatic leverage . Its geographic location, bridging the Mediterranean and the Sahel and sharing borders with six countries (Morocco, Mauritania, Mali, Niger, Libya, and Tunisia), makes it an indispensable partner for addressing regional security challenges. Its historical role in anti-colonial struggles and its non-aligned tradition confer diplomatic standing, particularly within Africa.

However, these assets are balanced by constraints. The hydrocarbon wealth, while substantial, creates dependence and vulnerability to price fluctuations. The neighbourhood includes multiple conflict zones—Libya, Mali, and the Sahel more broadly—that generate security spillovers. Relations with Morocco, the other regional heavyweight, are poisoned by the Western Sahara dispute. And the country’s authoritarian political structures limit its ability to project soft power and attract the kind of international investment that could accelerate economic diversification.

4.2 European Relations: Between Cooperation and Tension

Europe represents Algeria’s most important external relationship, encompassing energy trade, security cooperation, migration management, and historical ties. The European Union accounts for 63 per cent of Algerian exports and 26 per cent of imports . The energy relationship has been reinforced since the Russian invasion of Ukraine, as Europe has sought alternatives to Russian gas. Algeria has stepped into this role, with gas exports to Europe increasing and new infrastructure projects advancing.

The energy cooperation agenda was prominently displayed at the IMF-sponsored conference “North Africa: Connecting Continents, Creating Opportunities,” held in Algiers in February 2026 . The conference brought together Algerian ministers, IMF leadership, and European officials including Italian Environment and Energy Security Minister Gilberto Pichetto Fratin to discuss energy integration, global value chains, and financial cooperation . Algeria’s participation in the SoutH2 Corridor project—aiming to deliver 4 million tonnes of green hydrogen annually to Europe via Tunisia—and the Medlink underwater electricity interconnection to Italy signal the deepening of energy relationships beyond hydrocarbons .

Relations with France, the former colonial power and most significant bilateral partner, exhibit the characteristic pattern of Algeria’s European engagement: deep interdependence combined with recurrent tensions. The February 2026 visit of French Interior Minister Laurent Nunez to Algiers illustrates both dimensions. The visit resulted in reactivation of a “high-level security coordination mechanism spanning judicial, police and intelligence cooperation” . This mechanism, covering counterterrorism, migration management, and judicial cooperation, represents an effort to rebuild communication after diplomatic strains that included reciprocal ambassadorial withdrawals .

Yet the visit occurred against a backdrop of persistent disputes. France’s July 2024 shift in position on Western Sahara—supporting Morocco’s autonomy proposal—was strongly rejected by Algeria and contributed to bilateral tensions . The detention of the French journalist in Algeria remains unresolved . These issues illustrate the limits of compartmentalisation: even as security and economic cooperation deepen, political differences on sensitive questions continue to generate friction.

4.3 The Morocco Rivalry and Western Sahara

The rivalry with Morocco constitutes the most significant and intractable dimension of Algeria’s regional positioning. The dispute over Western Sahara, where Algeria supports the Polisario Front’s campaign for independence while Morocco asserts sovereignty and has proposed autonomy, has defined the bilateral relationship for decades.

Recent developments have intensified the conflict. In October 2025, the UN Security Council adopted Resolution 2797, which described Morocco’s autonomy plan as a “realistic political solution” and, significantly, omitted reference to self-determination as the means of resolving the conflict . This shift in international consensus has been reinforced by recognition of Moroccan sovereignty over the territory by several European countries, including France .

US political figures have weighed in forcefully on the Moroccan side. In February 2026, US Senator Joe Wilson called on Algeria to “sever ties with the Polisario Front and back Morocco’s autonomy plan for Western Sahara,” describing the Polisario as “communist terrorists destabilising Morocco and trying to establish a Marxist state in the desert” . Wilson’s statement, which also warned Algeria against alliances with Russia, Iran, and Tunisian President Kais Saied, reflects the alignment of significant US political currents with the Moroccan position .

Algeria has responded to these developments by maintaining its support for the Polisario and for UN-led efforts to achieve a resolution based on self-determination. However, the diplomatic tide appears to be moving against Algiers, with international consensus gradually shifting toward acceptance of Moroccan sovereignty or autonomy as the realistic outcome. This shift isolates Algeria regionally and complicates its broader diplomatic positioning.

The Morocco rivalry extends beyond Western Sahara to encompass competition for influence across North Africa and the Sahel, military competition (both countries maintain significant defence budgets), and efforts to attract international investment and partnership. The risk assessment notes that “tension has been amplified” by recent diplomatic developments and that “despite the bilateral friction, energy cooperation with the EU remains strong” —suggesting that Algeria’s European partners are managing to maintain energy relationships while aligning with Morocco on Western Sahara.

4.4 Sahelian Engagement: Niger and the Southern Neighbourhood

If relations with Morocco represent Algeria’s most difficult regional challenge, engagement with its southern neighbours—particularly Sahelian states—represents an arena of relative success and strategic alignment. The February 2026 visit of Nigerien Head of State General Abdourahamane Tiani to Algiers produced a joint statement affirming “the joint will of the two leaders to preserve the exemplary nature of their relations and face regional challenges together” .

The Algeria-Niger relationship encompasses multiple dimensions. Security cooperation is paramount, with both countries expressing “deep concern” about terrorist threats and transnational organised crime and affirming that “the security of one is inseparable from the security of the other” . They agreed to “immediately reactivate the relevant Algerian-Nigerien mechanisms to intensify coordination in border monitoring and harmonize strategies for combating terrorism” .

Economic integration features prominently in the bilateral agenda. The two countries agreed to accelerate completion of the Trans-Saharan Road project, the cross-border optical fibre link, and the Trans-Saharan Gas Pipeline project . These infrastructure initiatives aim to connect the two countries physically and economically, facilitating trade and regional integration. The leaders committed to “facilitating trade by simplifying customs and administrative procedures, establishing organised border markets, and encouraging cooperation projects” .

The joint statement’s language reflects a shared worldview emphasising African solutions to African problems: the leaders expressed “their conviction that the future of the Sahel will be built by the countries of the region themselves, through local and comprehensive solutions” and reiterated “their rejection of any foreign interference in the continent’s affairs” . This framing aligns with Algeria’s longstanding foreign policy principles of non-interference and sovereignty while also reflecting the Nigerien junta’s suspicion of external intervention.

The broader Sahel context, however, presents significant challenges. The risk assessment notes that “surveillance of the southern borders with Libya and the Sahel (Mali and Niger) remains a major concern” . Instability in Libya, jihadist activity across the Sahel, and the complex political transitions in Mali and Burkina Faso all generate potential security spillovers. Algeria’s strategy emphasises bilateral engagement, support for regional mechanisms, and opposition to foreign military intervention—a posture that distinguishes it from France’s more interventionist approach in the region.

4.5 Great Power Relations: Diversification and Caution

Algeria’s approach to great power relations is characterised by diversification and an effort to maintain strategic autonomy. The country has traditionally maintained close military ties with Russia, its primary arms supplier, and has cultivated economic relationships with China, which has become the second-largest source of imports and a significant investor in infrastructure, hydrocarbons, and mining .

However, the government has signalled interest in expanding partnerships to avoid excessive dependence on any single power. In January 2025, Algeria signed a Memorandum of Understanding with the United States to strengthen military cooperation . This move reflects calculation that diversified security partnerships serve Algerian interests better than exclusive reliance on Russia, particularly given Moscow’s diminished capacity and competing priorities amid the Ukraine war.

The Western Sahara dimension complicates Algeria’s US relationship. As Senator Wilson’s statement indicates, significant US political currents align with Morocco on this issue, and the Trump administration’s recognition of Moroccan sovereignty over Western Sahara (subsequently maintained by the Biden administration in modified form) has shifted US policy in a direction unfavourable to Algeria . Algeria’s ability to deepen security cooperation with Washington will depend in part on managing this disagreement.

Relations with Russia remain substantial, with Moscow continuing as the main arms supplier and a strategic ally on Western Sahara (though Russia abstained on UN Resolution 2797 rather than voting against it) . The risk assessment notes that Algeria is “keen to avoid excessive dependence on Moscow,” explaining the outreach to Washington . This balancing act reflects a broader Algerian strategy of maintaining relationships with multiple powers to preserve policy space.

5. Conclusion: Algeria’s Regional Standing and Future Trajectory

Algeria in early 2026 presents a study in contrasts: an economy growing robustly yet facing mounting fiscal pressures; a political system maintaining stability through authoritarian controls while managing lingering protest potential; a regional actor with significant assets but constrained by the Moroccan rivalry and shifting international alignments.

The economic picture is more nuanced than headline growth figures suggest. The World Bank’s upward revisions to growth forecasts indicate genuine momentum in non-hydrocarbon sectors, particularly manufacturing and services. Yet the deterioration of fiscal and external balances, the depletion of reserve funds, and the persistence of structural weaknesses in the private sector and regulatory environment point to underlying vulnerabilities. The government’s strategy of maintaining high social spending while hoping for favourable hydrocarbon prices to continue cannot be sustained indefinitely; fiscal consolidation, with all its political risks, appears inevitable.

The political system has demonstrated remarkable resilience, absorbing the shock of the 2019 Hirak and incorporating formal democratic procedures while preserving core authoritarian structures. President Tebboune’s re-election and the military’s continued role as ultimate guarantor of the system suggest continuity rather than transformation. However, the underlying grievances that fuelled the Hirak—youth unemployment, corruption, inadequate public services, restrictions on political expression—remain largely unaddressed. The government’s reliance on social spending to manage these grievances creates a vulnerability: if fiscal pressures force spending reductions, the potential for renewed mobilisation could re-emerge.

Regionally, Algeria navigates a complex and increasingly challenging environment. The energy relationship with Europe provides substantial leverage and economic benefits, but European alignment with Morocco on Western Sahara complicates this partnership. The Sahelian engagement, exemplified by the Niger visit, demonstrates Algeria’s capacity to build productive relationships with southern neighbours based on shared security concerns and economic complementarity. However, the Morocco rivalry colours all other regional relationships and imposes significant diplomatic costs.

Looking forward, Algeria’s trajectory will be shaped by several key variables: the evolution of global hydrocarbon prices and European energy demand; the government’s capacity to manage fiscal adjustment without triggering social unrest; the evolution of the Western Sahara dispute and international consensus thereon; and the success or failure of efforts to deepen economic diversification and private sector development. The country’s substantial assets—energy resources, geographic position, young population, historical legitimacy—provide foundations for a positive trajectory. Whether these assets can be translated into sustainable development and regional influence depends on political choices that remain to be made.