2017 Index of Economic Freedom

Algeria

overall score46.5
world rank172
Rule of Law

Property Rights38.2

Government Integrity31.7

Judicial Effectiveness29.6

Government Size

Government Spending51.0

Tax Burden81.1

Fiscal Health19.8

Regulatory Efficiency

Business Freedom62.1

Labor Freedom49.5

Monetary Freedom67.0

Open Markets

Trade Freedom63.3

Investment Freedom35.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 39.5 million
  • GDP (PPP):
    • $578.7 billion
    • 3.7% growth
    • 3.3% 5-year compound annual growth
    • $14,504 per capita
  • Unemployment:
    • 10.5%
  • Inflation (CPI):
    • 4.8%
  • FDI Inflow:
    • $-587.3 million
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Institutional weaknesses continue to undermine prospects for sustained long-term economic development in Algeria. Lingering political uncertainty and a negative attitude toward foreign investment hamper fuller integration into the world economy, and policies to promote or sustain reform have been neglected or even reversed.

The government has made little progress in improving fiscal governance. Structural reforms to diversify the economic base have achieved only marginal progress, and policies to enhance regulatory efficiency and maintain open markets for the development of a more dynamic private sector have not advanced.

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Background

President Abdelaziz Bouteflika won a fourth term in April 2014 despite rarely appearing in public after a 2013 stroke. Reforms introduced after Arab Spring protests swept Tunisia and Libya included an end to almost two decades of state-of-emergency restrictions on civil liberties. In early 2016, the government passed a series of major constitutional amendments to strengthen Algeria’s governing structure and deepen separation of powers. The socialist model adopted after independence from France in 1962 has hindered development, and the state still dominates the economy. Formal-sector unemployment and housing shortages are persistently high. Algeria is the world’s eighth-largest gas exporter. Oil and natural gas account for over 90 percent of exports and around 40 percent of GDP.

Rule of LawView Methodology

Property Rights 38.2 Create a Graph using this measurement

Government Integrity 31.7 Create a Graph using this measurement

Judicial Effectiveness 29.6 Create a Graph using this measurement

Secured interests in property are generally enforceable, but most real property is in government hands, and conflicting title claims can make real estate transactions difficult. The judicial system is generally weak, slow, and opaque. High levels of corruption plague Algeria’s business and public sectors, especially the energy sector. An estimated one-half of all economic transactions in Algeria occur in the informal sector.

Government SizeView Methodology

The top income tax rate is 35 percent, and the top corporate tax rate is 23 percent. Other major taxes include a value-added tax. The overall tax burden equals 11.7 percent of total domestic income. Government spending has amounted to 40.4 percent of total output (GDP) over the past three years, and budget deficits have averaged 7.7 percent of GDP. Public debt is equivalent to 8.7 percent of GDP.

Regulatory EfficiencyView Methodology

Despite some enhancement of the business environment, significant bureaucratic impediments to entrepreneurial activity and economic development persist. The labor market remains rigid, contributing to high youth unemployment. In spite of continuing low global oil prices, the government has struggled to maintain costly but politically popular subsidies for basic foods, fuels, electricity, health care, and housing.

Open MarketsView Methodology

Trade is important to Algeria’s economy; the value of exports and imports taken together equals 63 percent of GDP. The average tariff rate is 8.4 percent. The government screens foreign investment, and its customs process is cumbersome. Capital markets are underdeveloped; private banks have grown, but the financial sector remains dominated by public banks.

Country's Score Over Time

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Regional Ranking

rank country overall change
1United Arab Emirates76.94.3
2Qatar73.12.4
3Israel69.7-1.0
4Bahrain68.5-5.8
5Jordan66.7-1.6
6Kuwait65.12.4
7Saudi Arabia64.42.3
8Oman62.1-5.0
9Morocco61.50.2
10Tunisia55.7-1.9
11Lebanon53.3-6.2
12Egypt52.6-3.4
13Iran50.57.0
14Algeria46.5-3.6


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