Algeria’s economy in the red after oil price drop

Algeria will have to further tighten the belt as barrel prices drop to below $60,boding ill for its export,fiscal deficit,and social peace.

Algeria has based its 2025 budget on a barrel price of $70,with over 90% of the country’s economy dependent on oil,gas and byproduct exports.

International risk consultancies are warning of a decline in the Algerian economy,as the government adopts an expansive budget to sustain its lavish subsidies policy,coupled with import cuts to keep foreign reserves from outflowing.

Algeria has increased its budget spending in 2025 to a record $128 billion with an expected fiscal deficit of $62 billion,which is equivalent to 19.8% of GDP.

The backbone of the country’s economy,Sonatrach,which runs oil and gas,is grappling with prospects of falling production together with decreasing prices.

“The long-term outlook is challenging,with production declines anticipated from 2027 onwards. By 2034,total oil production is expected to decrease to 1.18mn b/d,” Fitch Solutions recently said in an analysis.

This decline is due to lack of new projects and aging fields as investors shun Algeria’s unfriendly business climate.

Falling domestic production is coupled with the global energy transition which would affect demand on Algerian gas and oil,with prospects of further falling prices.

“Algeria’s export revenues are at risk due to declining production,uncertain European markets,and new refining projects potentially diverting crude for domestic use,challenging future export volumes amid global shifts towards lower-carbon energy sources,” according to Fitch Solutions.