The Economist Intelligence Unit believes there is a high risk of political instability in the first few years of the forecast period. The president, Abdelaziz Bouteflika, has been in power since 1999 and his current mandate, his third-secured following constitutional amendments that lifted the two-term limit for presidents-runs until 2014. Political and social unrest across the Arab world has already unseated the regimes of Zine el-Abidine Ben Ali in neighbouring Tunisia and Hosni Mubarak in Egypt and has resulted in international military action against Libya. Mr Bouteflika has responded to pressure on his rule in the past by removing ministers to accommodate powerful state institutions, such as the military or the security services, but this type of change might prove an ineffective response. If mass demonstrations were to call for serious political change, we would expect the Algerian state to use repressive force to put down any uprisings. Mr Bouteflika faces challenges from across the political scene, as liberals and Islamists resent their exclusion from the political process, weakening the ruling three-party coalition known as the presidential alliance.

Price riots and political demonstrations since January have shaken the regime into making economic and political concessions. The president convened the Haut conseil de securité (the National Security Council) for the first time since 1999 and lifted the state of emergency that has been in force in Algeria since 1992. A cabinet reshuffle in 2010 removed several allies of Mr Bouteflika from the government, with long-serving technocrats taking their places, and there are rumours that another one may be imminent. Speculation continues about divisions within the ruling coalition and about whether disagreements within the country's leadership led to the replacement of the senior management at Sonatrach, the national oil and gas company, in January 2010, following a corruption inquiry.

Social unrest will be a major factor in shaping political developments in 2011, especially as Algerians react to unrest across the Arab world. The factors that contributed to the fall of the governments in Egypt and Tunisia-large-scale youth unemployment, widespread perceptions of corruption among the ruling elite and limited political expression-all exist to a large degree in Algeria. There is also resentment over the elite's seemingly indifferent attitude, known as hogra, towards the bulk of Algerians. Riots and protests were already a problem, particularly over the supply of housing. Public-sector strikes-involving teachers, doctors, oil and gas industry workers and municipal guards among others-have been the main way Algerians have express discontentment with their government so far. The government has the ability to meet some of the short-term economic demands of protesters, by capping the price of food for example, because it has a large oil stabilisation fund, the Fonds de régulation des recettes. However, were Algerians to protest forcefully and coherently against the structure of the government, particularly the concentration of power in the executive and the military, we expect the regime to lack the flexibility or credibility among the people to meet their demands through constitutional means.

The re-election of Mr Bouteflika required constitutional amendments to abolish the two-term limit for presidents. The amendments concentrated power in the hands of the president and also weakened the role of the prime minister. However, the power of the role depends on the prime minister's relationship with Mr Bouteflika. There has been criticism that some policies, particularly economic ones, have been decided exclusively by the president and presented to the cabinet without consultation.

Sporadic attacks by armed Islamists will remain a security concern for Algeria. A small, radical Islamist organisation, al-Qaida in the Islamic Maghreb (AQIM, previously known as the Groupe salafiste pour la prédication et le combat), continues to carry out attacks on the state, including assaults on the military, state representatives and the offices of foreign businesses. Security installations around foreign-owned operations and the capital, Algiers, have been strengthened. However, we do not expect the militants to pose a serious threat to political stability.

The absence of a clear successor to Mr Bouteflika will represent a considerable risk in the forecast period. At present it is unclear who will take over the leadership after Mr Bouteflika's current term expires or whether the 74-year-old president will be able to complete his term in office. The prime minister, Ahmed Ouyahia, is a likely candidate to succeed the president, although he is rumoured to be at risk in the event of a possible cabinet reshuffle. The energy minister, Youcef Yousfi, has also been mooted as a technocratic, but malleable, alternative. There is a risk that the prospect of any figure associated with the current regime emerging as an "heir apparent" to Mr Bouteflika will provoke deep divisions in Algerian society, triggering mass protests.