Algeria’s Economy Grows 4.1% in 2025 as Non-Hydrocarbon Sectors Strengthen

While non-hydrocarbon activity continued to gain momentum, Algeria experienced a decline in hydrocarbon exports alongside an increase in imports driven by higher investment demand.

Algeria’s economic performance strengthened in the first half of 2025, with GDP expanding by 4.1%, according to the World Bank’s Fall 2025 Algeria Economic Update. Full-year growth is expected to reach 3.8%, supported by a robust 5.4% expansion in non-hydrocarbon sectors, ranging from manufacturing and construction to services and agriculture.

Inflation eased significantly during the year, dropping to 1.7% over the first nine months—its lowest level in several years. The report attributes this to falling food prices, improved domestic supply conditions, and a stable exchange rate, which helped anchor inflation expectations.

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Non-Hydrocarbon Sectors Lead Growth Amid Shifting Trade Trends

While non-hydrocarbon activity continued to gain momentum, Algeria experienced a decline in hydrocarbon exports alongside an increase in imports driven by higher investment demand. These developments improved productive capacity but placed pressure on external accounts. Hydrocarbon revenues also remained below past peaks, reinforcing the country’s need to diversify income sources and strengthen fiscal resilience.

Cemile Hacibeyoglu Ceren, World Bank Group Resident Representative for Algeria, emphasized the importance of policy clarity and private-sector growth: “Algeria can build on recent gains and move toward faster private-sector-led growth that creates quality jobs and supports innovation. Clear and predictable policies, alongside incentives for investment and innovation, will reinforce competitiveness.”

The manufacturing sector, in particular, has benefited from public investments and regulatory improvements aimed at localizing production. Meanwhile, tourism, transport, and retail services continue to recover as domestic consumption strengthens.

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Medium-Term Outlook: Growth Moderates but Remains Positive

The World Bank projects Algeria’s GDP to grow 3.5% in 2026 and 3.3% in 2027, with non-hydrocarbon sectors remaining the primary engine of expansion. Growth is expected to moderate but stay resilient as long as reform momentum is maintained.

Key reforms include:

• Improving the business climate

• Expanding access to finance for SMEs

• Streamlining regulations for investment

• Strengthening domestic competition

• Accelerating digitalization of government services

Daniel Prinz, World Bank Economist for Algeria, noted: “Easing price pressures and solid non-hydrocarbon activity are encouraging. Continued reforms will be essential to sustaining diversified and sustainable growth.”

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Climate Policy and Competitiveness: Preparing for CBAM

The report highlights the increasing relevance of climate policy for Algeria’s long-term competitiveness, particularly as global markets shift toward decarbonization. The upcoming implementation of the European Union’s Carbon Border Adjustment Mechanism (CBAM) poses new challenges and opportunities for Algerian exporters, especially in carbon-intensive industries such as cement, steel, and fertilizers.

To stay competitive, Algeria must:

• Accelerate its clean energy transition

• Improve energy efficiency in industries

• Strengthen environmental standards

• Integrate climate goals into national development plans

Adapting to these changes will help secure export markets and attract foreign investment, especially in green industries.

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A Moment of Opportunity for Structural Transformation

Algeria’s 2025 economic performance shows encouraging signs of diversification, macroeconomic stabilization, and inflation control. With consistent reforms, strengthened private-sector participation, and climate-responsive policy planning, the country is positioned to achieve more resilient, inclusive, and sustainable growth in the coming years.