Algeria has a mixed market economy. Since independence in 1962, Algeria has launched major economic projects to build up a dense industrial base. However, despite these major achievements (universal education and infrastructure projects), the Algerian economy has gone through various stages of turbulence.

In the 1980s, the Algerian economy experienced major difficulties. The 1980s oil glut dealt a heavy blow to a virtually rentier economy, during the period of anti-scarcity and stabilization plans. In the early 1990s, Algeria embarked on a series of structural reforms, making the transition to a market economy a reality.

The Algerian economy remains highly dependent on hydrocarbon rents, which represent 60% of government revenue and 90% of export revenue, but the country is working heavily in diversifying and establishing internationally competitive industrialization.

The 2017 report on Algeria by business intelligence and consultancy firm Oxford Business Group (OGB), highlights the efforts devoted by the country to strengthening and diversifying its economy against the backdrop of falling oil prices. The report highlights the growing contribution of the private sector to GDP, in particular the role of small and medium-sized enterprises (SMEs) supported by new measures; as well as the financial services sector, which has seen positive developments such as the introduction of online payments.

Despite the efforts made, the country still faces a number of short-term problems, including the need to diversify the economy, strengthen political, economic and financial reforms, improve the business climate and reduce social inequality between regions, in order to achieve better economic growth. Algeria has the triple leverage of energy, mining and agriculture to contribute, in the long term, to containing the supply crises in energy, rare earths (minerals useful for technology) and food.

Published in 2023, the World Bank's report on the Algerian economy calls for the acceleration of institutional and macro-economic reforms, and paints a positive picture for the country's economy. The World Bank notes that the promulgation in 2022 of the new Investment Law and the publication of its implementing regulations, the abolition in 2020 of the 51/49 rule for non-strategic sectors, and the publication of the new Hydrocarbons Law in 2019 are positive steps, but must tackle the ecosystem, including paralyzing bureaucracy, with greater visibility in socio-economic policy.

Continued implementation of government structural reform programs, creating greater openness to the private sector, improving the economy’s competitiveness, and strengthening investment in human capital are all essential to the flourishing and resilience of the Algerian economy.

Historical trends The total imports and exports on the eve of the French invasion (in 1830) did not exceed £175,000. By 1850, the figures had reached £5,000,000; in 1868, £12,000,000; in 1880, £17,000,000; and in 1890, £20,000,000. From this point progress was slower and the figures varied considerably year by year. In 1905 the total value of the foreign trade was £24,500,000. About five-sixths of the trade is with or via France, into which country several Algerian goods have been admitted duty-free since 1851, and all since 1867. French goods, except sugar, have been admitted into Algeria without payment of duty since 1835. After the 1892 increase of the French minimum tariff which applied to Algeria for the first time, foreign trade greatly diminished.

GDP per capita grew 40% in the 1960s, reaching a peak growth of 538% in the 1970s.GDP: GDP per capita, current US dollars Growth collapsed to 9.7% in the turbulent 1980s due to falling oil prices. Failure of timely reforms by successive governments caused the current GDP per capita to shrink by 28% in the 1990s, a decline exacerbated by the Black Decade.

This is a chart of trend of gross domestic product of Algeria at market prices estimated by the International Monetary Fund.

Year Gross Domestic Productmillion Algerian dinars US Dollar Exchange Algerian dinars Inflation Index (2000=100) Per Capita Income (as % of USA) 1980 162,500 3.83 9.30 18.51 1985 291,600 4.77 14 15.55 1990 554,400 12.19 22 10.65 1995 2,004,990 47.66 73 5.39 2000 4,123,514 75.31 100 5.17 2005 7,493,000 73.44 114 7.43 For purchasing power parity comparisons, the US dollar is exchanged at ~130 Algerian dinars as of Q3 2025. Average wages in 2025 are at around 1,428 DZD per day.

History

Planned economy (1962-1978) The period from independence in 1962 to 1971 was marked by the nationalization of key economic sectors and the creation of public enterprises like Sonatrach and Sonelgaz, as well as the establishment of an industrial sector and the finishing of public institutions. In 1966, a year after Houari Boumédiène seized power in a coup d'état, he nationalized mines and foreign insurance companies and signed a cooperation agreement with France. Algeria joined the OPEC cartel in 1969. In 1971 the government acquired 51% of the assets of French oil companies in Algeria, effectively nationalizing the hydrocarbon industry. In November of 1971, the government launched its program of "agrarian revolution", a plan to reorganize land and technology distribution in agriculture, in an effort to increase the domestic supply of food. At the same time, it launched the socialist management of enterprises.

Crisis, restructuring, and privatization (1979-1993) In the early 1980s, while the Algerian economy was being structured, the economic crisis was exacerbated by an oil glut. The decline of crude oil prices in mid-1985 brutally accelerated in 1986. The fall of oil prices by 40% brutally exposes the Algerian economy's structural dysfunctions and reduced massively the illusion of the industrial potential of Algeria and reveals the dependency and fragility of a system built on solely the performance of the hydrocarbons sector.

The 1980s oil glut had profound impact on the country's socioeconomic plan. An uprising in 1988 ended the one-party socialist system that had ruled Algeria up until then. In 1991, as parliamentary elections were held, the Islamic Salvation Front (FIS) was poised to win, prompting the military to cancel the elections, thus resulting in the Black Decade, which only made the crisis worse. In 1993, hydrocarbons accounted for 98% of export revenue and 90% of medical needs while the country became increasingly dependent on food imports.

The 1986 oil price crash and the Black Decade declared a double crisis. As a result, the country found itself externally indebted to avoid a humanitarian crisis and keep the nomenclature for import contracts, which worsened the already fragile situation. Between 1989-1993, debt servicing absorbed 70% of the country's resources and by 1993, this level reached 80%. Consequently, the functioning of the economy and basic needs of the population were less guaranteed and debt continued to rise.

Import bans on several products led to the decline of what little industry was present as well as a significant deterioration of production tools. The financial situation of state-owned enterprises (SOEs) which make up for 90% of Algerian production deeply deteriorated. By 1990, there were attempts at economic liberalization under the government of Mouloud Hamrouche (and then reviewed by his successors), but Algeria as a result of the Black Decade would not attract foreign investors or return immigration capitals

Transition to a market economy In early 1994, the transition from a command economy to a market economy was confronted by the devaluation of the dinar, the liberalization of foreign trade and prices, and external debt rescheduling. With the anchorage of the market economy, the middle class primarily composed of civil servants, would be decimated in a few years.

Burdened with a heavy foreign debt, Algiers concluded a one-year standby arrangement with the International Monetary Fund in April 1994 and the following year signed onto a three-year extended fund facility which ended 30 April 1998. In March 2006, Russia agreed to erase $4.74 billion of Algeria's Soviet-era debt during a visit by President Vladimir Putin to the country, the first by a Russian leader in half a century. In return, president Abdelaziz Bouteflika agreed to buy $7.5 billion worth of combat planes, air-defence systems and other arms from Russia, according to the head of Russia's state arms exporter Rosoboronexport.

Some progress on economic reform, Paris Club debt reschedulings in 1995 and 1996, and oil and gas sector expansion contributed to a recovery in growth since 1995, reducing inflation to approximately 1% and narrowing the budget deficit. Algeria's economy has grown at about 4% annually since 1999. The country's foreign debt has fallen from a high of $28 billion in 1999 to $5 billion. The end of the Black Decade with the defeat of Islamic insurgents, the spike in oil prices in 1999–2000 and the government's tight fiscal policy, as well as a large increase in the trade surplus and the near tripling of foreign exchange reserves has helped the country's finances. However, an ongoing drought, the after effects of the floods of 10 November 2001 and an uncertain oil market made prospects for 2002-03 more problematic. The government has pledged to continue its efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector.

President Bouteflika has announced sweeping economic reforms, which, if implemented, will significantly restructure the economy. Still, the economy remains heavily dependent on volatile oil and gas revenues. The government has continued efforts to diversify the economy by attracting foreign and domestic investment outside the energy sector, but has had little success in reducing high unemployment and improving living standards. Other priority areas include banking reform, improving the investment environment, and reducing government bureaucracy.

The government has announced plans to sell off state enterprises: sales of a national cement factory and steel plant have been completed and other industries are up for offer. In 2001, Algeria signed an Association Agreement with the European Union. In June 1987, Algeria started accession negotiations for entry into the World Trade Organization, but negotiations ceased in 2014.

In the 2000s the country enjoyed several years of strong economic performance, with solid non-hydrocarbon growth, low inflation, an overall budget surplus and a positive trade balance.

Data

GDP In 2025 Algeria's nominal GDP is estimated to be US$288.01 billion. Using purchasing power parity, estimated GDP was US$874.6 billion, or US$18,510 on a per capita basis. The estimated real growth rate is 3.4%, down from 3.7% in 2024. In 2023, industry accounted for 37.8%% of GDP, services constituted 45.6%, and agriculture provided the remaining 13.1%.

After having virtually eliminated external debt before 2013, the drop hydrocarbon prices and revenues has led to a large budget deficit which has been only partly offset by spending cuts. Consequently, government debt has increased to more than 30% of GDP. Inflation has remained at 3-6% on average for 2013–17. However, the economy remains highly dependent on hydrocarbons, which represent 89% of total exports; a continued slowdown of global energy demand has significantly put pressure on Algeria's fiscal and external positions.

Government budget In 2025, government revenues are projected to 8,253 billion DZD ($64 billion). Receipts from the hydrocarbons industry usually account for roughly 60% of revenues.Algeria country profile, p. 11.

Development of macroeconomic indicators The following table shows the main economic indicators in 1980–2023. Inflation under 5% is in green.