2014 Index of Economic Freedom

Algeria

overall score50.8
world rank146
Rule of Law

Property Rights30.0

Freedom From Corruption28.7

Limited Government

Government Spending51.0

Fiscal Freedom80.5

Regulatory Efficiency

Business Freedom66.3

Labor Freedom48.3

Monetary Freedom67.8

Open Markets

Trade Freedom60.8

Investment Freedom45.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 36.5 million
  • GDP (PPP):
    • $272.9 billion
    • 2.5% growth
    • 2.4% 5-year compound annual growth
    • $7,477 per capita
  • Unemployment:
    • 9.7%
  • Inflation (CPI):
    • 8.9%
  • FDI Inflow:
    • $1.5 billion
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Algeria’s economic freedom score is 50.8, making its economy the 146th freest in the 2014 Index. Its overall score is 1.2 points better than last year due to notable score improvements in investment freedom and the management of government spending. Algeria is ranked 14th among the 15 countries in the Middle East and North Africa region, and its score remains lower than both the regional and world averages.

Over the 20-year history of the Index, Algeria’s economic freedom score has declined by almost 5 points, one of the 20 worst losses of economic freedom. Seven of the 10 economic freedoms, notably property rights, freedom from corruption, the management of government spending, and financial freedom, have declined. The Algerian economy remains just at the bottom of the category of “mostly unfree” states.

As policies to sustain reform measures have been neglected or even reversed, Algeria has become more dependent on the hydrocarbon sector. In light of increasing social discontent, the government in recent years has adopted expansionary public spending programs, making little progress in improving fiscal governance.

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Background

President Abdelaziz Bouteflika won a third term in 2009 in an election that was boycotted by some political parties. After the “Arab Spring” protests swept neighboring Tunisia and Libya, the government introduced some political reforms, including an end to state-of-emergency restrictions that had lasted almost two decades. The socialist model adopted after Algeria gained its independence from France in 1962 has hampered 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 28.7 Create a Graph using this measurement

An estimated one-half of all economic transactions occur in the informal sector, beyond the reach of Algeria’s generally weak, slow, and opaque judiciary system. An investigation into the state oil and gas company (Sonatrach) was launched in 2013 after the interior minister reported that up to one-quarter of the domestic production of petroleum products is smuggled out of the country. Most real property remains in government hands.

Limited GovernmentView Methodology

The top individual income tax rate is 35 percent. The corporate tax rate is two-tiered: 25 percent for the non-tourism services sector and 19 percent for the tourism and production sectors. Other taxes include a value-added tax (VAT). The overall tax burden is 10 percent of GDP, and public debt is about 10 percent of the economy. Government spending is slightly over 40 percent of GDP. The hydrocarbon sector continues to boost public finances.

Regulatory EfficiencyView Methodology

Significant bureaucratic impediments to entrepreneurial activity and economic development persist. Launching a business requires over 10 procedures, there are minimum capital requirements, and obtaining necessary permits can take more than 200 days. The labor market remains rigid, contributing to high youth unemployment of over 20 percent. The government uses price ceilings, tariffs, and redistribution schemes to control prices.

Open MarketsView Methodology

Algeria has a 12.1 percent average tariff rate. The government restricts imports of medicine, medical products, and used earth-moving equipment. It also screens foreign investment, and foreign participation in new investments may not exceed 49 percent. Reflecting the difficult access to financing, credits to the private sector remain low. The equity market is underdeveloped, with a capitalization of less than 1 percent of GDP.

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

Regional Ranking

rank country overall change
1Bahrain75.1-0.4
2United Arab Emirates71.40.3
3Qatar71.2-0.1
4Jordan69.2-1.2
5Israel68.41.5
6Oman67.4-0.7
7Kuwait62.3-0.8
8Saudi Arabia62.21.6
9Lebanon59.4-0.1
10Morocco58.3-1.3
11Tunisia57.30.3
12Yemen55.5-0.4
13Egypt52.9-1.9
14Algeria50.81.2
15Iran40.3-2.9


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