Algeria

Algeria’s Trade Deficit Widens Due to Decline of Oil Prices

Ezzoubeir Jabrane

Rabat - Algeria’s trade deficit continues to widen with the drop in oil prices, heralding  major economic problems for Morocco’s eastern neighbor.

The drop in oil prices on the international market over the last two years continues to worsen Algeria’s commercial deficit. The country relies heavily on petroleum, which makes up 95 percent of Algeria’s export. Imports have also seen a decline due to the austerity measures taken by the Algerian government.

Algeria’s export earnings stood a USD 22.7 billion at the end of October. This is a 23.44 percent drop compared to last year.

Algeria, which runs a structural trade deficit, saw another decline of 11.3 percent in its imports. At the end of October, Algeria imported $38.5 billion worth of commodities compared to $43.5 billion in October of 2015.

According to the French-language news source, Le360, the austerity policy is meant to control the trade deficit by freezing investment in certain sectors and setting restrictive measures on imports like quotas on vehicles, cement and building materials.

Despite the government’s effort to decrease the trade deficit, it rose from $13.7 billion in October 2015 to $15.8 billion in 2016.

There is no sign that oil prices will increase in the near future, and Algeria has attempted, to no avail, to convince oil-producing countries to reduce oil production in order to increase crude oil prices.

Internally, the situation threatens to reduce Algeria’s reserve of hard currency and restrict state aid to Algerian companies. A rollback on government aid would make it difficult for companies to restructure in accordance to the international markets and would limit Algeria’s ability to diversify its exports, which may be its only means of escape.

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