Algeria on the brink of the pandemic and the low price of oil are taking their toll

In front of a bank in Algiers, Slimane removed necklaces and gold rings from a bag, his wife’s jewelry, which he hoped to use as collateral for a loan.

During the pandemic, the 46-year-old businessman had to close his small business designing and producing advertising material and let go of his four full-time workers.

“It was very hard. It seemed to me that the sky fell on my head, ”said Slimane, who did not want his full name published. “The pandemic has forced companies to reduce business or close completely, especially in the travel sector that relied on customers. My wife asked me to pawn her gold jewelry so I could start a grocery store in our neighborhood. ”

The coronavirus pandemic has hit Algerians hard, exacerbating the problems of a state-dominated economy, already marked by years of falling oil prices and declining local and foreign investment.

Even before the pandemic, just under a third of young Algerians were unemployed and many had expected a change after the huge protests that led to the overthrow of President Abdelaziz Bouteflika in 2019.

But with a non-diversified economy, which depends solely on oil and gas exports, and depletion of foreign exchange reserves, Algeria could soon face an economic disaster, analysts warn. Few believe that politicians can bring about meaningful change, which was made clear by low turnout in last weekend’s election. For the military-backed regime, analysts say, the parliamentary poll, the first since the protests, allowed it to project a democratic renewal, while any coalition government resulting from independents and pro-regime parties is unlikely to shake the status quo.

“The economic trend is extremely negative,” said Riccardo Fabiani, North Africa director of the International Crisis Group, a conflict resolution organization. “There is a liquidity crisis in banks and local companies. In construction, the most important sector after oil, there have been a record number of bankruptcies. The country could be heading for an economic disaster with a high social cost. “

The economy shrank 6% last year, according to the IMF, which predicts growth of 2.9% in 2021 due to higher oil prices. He predicts a budget deficit of 18.4% of gross domestic product in 2021. To balance his budget, the lender said Algeria needed an oil price of $ 169.6 per barrel, more than double the current price of $ 72. . However, analysts say, there is no clarity on how the regime plans to avert a possible economic catastrophe.

“Politicians say they want to open up the economy and diversify,” said Mabrouk Aib, a university professor and public policy analyst in Algeria. “It simply came to our notice then. That’s what they’re saying, but we don’t really know if they have a clear strategy on how they’re going to implement this. ”

Although falling oil prices in recent years have reduced government finances and limited their ability to provide documents and create jobs for their predominantly young population, military decision-makers Algeria, or decision makers as is well known, they have failed to diversify the economy. Instead, successive governments have burned through foreign exchange reserves, which fell from $ 200 billion in 2014 to $ 47 billion in 2020.

The military, which has traditionally controlled key decisions since then independence of France in 1962, he was reluctant to introduce reforms that would banish the private sector, encourage investment, and bring transparency to an economic system based on a network of vested interests and petrodollar-fueled clientelism. Under Bouteflika, a friendly capitalist private sector was allowed to prosper which benefited from the political patronage and generosity of the government. Many of these businessmen are now in jail on corruption charges and some of their businesses have been taken over by the state.

Given its lack of external debt and rising oil prices, the Algerian regime could still buy “one or two years,” Fabiani said. It could resort to bilateral loans from China or the Gulf. President Abdelmadjid Tebboune last year ruled out an IMF loan, suggesting it would restrict the country’s ability to have an independent foreign policy. “The big question remains, what will the new government do,” Fabiani said. “Will any new ideas emerge?”

Already rising prices have led to repeated demands for wage increases and strikes by different sectors of society, from teachers to doctors and postal workers. Firefighters protested in full uniform last month and were dispersed by police using tear gas.

Suspicious of the protests, authorities repressed themselves in the run-up to the election, avoiding the marches of the country’s pro-democracy movement that ousted Bouteflika in 2019 and flooding downtown Algiers with police cars. More than 200 people are in jail in connection with the protests.

Authorities may stifle dissent, but know that living conditions are increasingly harsh for Algerians who suffer the combined impact of closures, business closures and inflation.

“I have a family of seven to support, but the construction company I worked for has closed,” said Samir Yefsa, a 50-year-old unemployed man. “The state was our only customer, but now the government has no construction program. I do not know what to do. I have trouble feeding my family. I can only apply for loans from family and friends who are retired and living on pensions, because younger ones are in a similar situation to mine. ”

In a market in Algiers, Naima, a primary school teacher, complained about rising prices and the erosion of her purchasing power. “I swear I haven’t bought fruit for my kids for two months,” he said. “Now there are certain items that are too expensive for those with medium or small incomes.”