We expect economic growth in Algeria to average 4.2% in 2011-15, below potential given the country's resource endowment and demographics. Growth will be led by the state's investment package as the government tries to lessen the economy's reliance on hydrocarbons. In 2010 higher exports and lower inflation helped the economy to expand by an estimated 4.1%. In 2011 Algeria will benefit from high oil prices, but low gas production and weak levels of foreign investment will dampen GDP growth to 3.7%. The non-hydrocarbons sector will continue to expand throughout the forecast period, although its share of overall GDP means that this will not add significantly to overall growth in the economy.

Recent policies to limit imports and restrict credit will keep private consumption below potential, given the relative wealth of the country, compared with regional peers. Infrastructure projects, such as expanding the housing stock and major road construction, are under way but are often subject to delays despite the availability of local, largely government, funding. Government spending has supported the economy in a difficult international environment, and expansion of the civil service and increases in public-sector wages will continue. Lagging investment in the energy sector, Algeria's economic engine, will drag on export growth. Restrictions on foreign investment will also keep international non-oil companies from investing in major projects.

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