2015 Index of Economic Freedom

Algeria

overall score48.9
world rank157
Rule of Law

Property Rights30.0

Freedom From Corruption36.0

Limited Government

Government Spending38.7

Fiscal Freedom80.0

Regulatory Efficiency

Business Freedom66.6

Labor Freedom50.5

Monetary Freedom71.2

Open Markets

Trade Freedom60.8

Investment Freedom25.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 37.9 million
  • GDP (PPP):
    • $285.5 billion
    • 2.7% growth
    • 2.8% 5-year compound annual growth
    • $7,534 per capita
  • Unemployment:
    • 9.8%
  • Inflation (CPI):
    • 3.3%
  • FDI Inflow:
    • $1.7 billion
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Algeria’s economic freedom score is 48.9, making its economy the 157th freest in the 2015 Index. Its overall score is 1.9 points lower than last year due to considerable declines in investment freedom and the management of government spending that outweigh improvements in freedom from corruption and monetary freedom. Algeria is ranked 14th among the 15 countries in the Middle East/North Africa region, and its score remains lower than both the regional and world averages.

Algeria’s economy has been on a declining path of economic freedom over the past five years. Having registered the seventh-largest overall score decline in the 2015 Index, the economy is now rated “repressed.” Public spending, bolstered by the hydrocarbon sector, has been expanding in recent years, undermining fiscal governance.

As policies to sustain regulatory efficiency and open markets have been neglected or even reversed, the economy has become more dependent on the state-dominated energy sector. Tariff and non-tariff barriers, coupled with burdensome business and investment regulations, continue to hamper development of a more dynamic private sector and interfere with much-needed diversification of the economic base.

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Background

President Abdelaziz Bouteflika won a fourth term in April 2014 despite rarely appearing in public after a 2013 stroke. After the “Arab Spring” protests swept Tunisia and Libya, the government introduced some political reforms, including an end to state-of-emergency restrictions on civil liberties that had lasted almost two decades. The socialist model adopted after independence from France in 1962 has hindered development. Formal-sector unemployment remains persistently high, and there is a housing shortage. Algeria is the world’s sixth-largest exporter of natural gas and has the world’s 10th-largest natural gas reserves and 16th-largest oil reserves. The government began a five-year, $286 billion program to modernize infrastructure in 2010 and appears to be trying to attract foreign and domestic private investment and to diversify the economy.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 36.0 Create a Graph using this measurement

In 2014, the government introduced constitutional revisions that appear to be pro-democratic, but few expect improvements in the generally weak, slow, and opaque judicial system. High levels of corruption plague Algeria’s business and public sectors, especially the energy sector. An estimated one-half of all economic transactions occur in the informal sector. Most real property remains in government hands.

Limited GovernmentView Methodology

Algeria’s modest tax revenue amounts to around 12 percent of GDP. Individual income and corporate tax rates remain unchanged at 35 percent and 25 percent, respectively. Companies involved in tourism and mining pay reduced rates. Other taxes include a value-added tax. Government expenditures equal 45.2 percent of the domestic economy, and public debt is below 10 percent of gross domestic product.

Regulatory EfficiencyView Methodology

Despite some enhancement of the business environment, significant bureaucratic impediments to entrepreneurial activity and economic diversification persist. The labor market remains rigid, contributing to a high youth unemployment rate. Generous but unsustainable state spending on subsidies for food and fuel, price ceilings, and redistribution schemes to control prices have been used to stave off political unrest.

Open MarketsView Methodology

Algeria has an 8.6 percent average tariff rate. Imports of medical equipment and used earth-moving equipment are restricted. The government screens foreign investment, and regulatory barriers discourage some investors. The financial system remains subject to government interference. State-owned banks provide over 80 percent of loans. The degree of financial intermediation remains low.

Country's Score Over Time

Bar Graph of Algeria Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Algeria to other economic country groups Download Charts

Regional Ranking

rank country overall change
1Bahrain73.4-1.7
2United Arab Emirates72.41.0
3Qatar70.8-0.4
4Israel70.52.1
5Jordan69.30.1
6Oman66.7-0.7
7Kuwait62.50.2
8Saudi Arabia62.1-0.1
9Morocco60.11.8
10Lebanon59.3-0.1
11Tunisia57.70.4
12Egypt55.22.3
13Yemen53.7-1.8
14Algeria48.9-1.9
15Iran41.81.5


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