Outlook for 2011-15

• The Economist Intelligence Unit expects social unrest to pose a serious risk to political stability in the forecast period. After the uprisings across the Arab world, Algerians could mobilise in similar anti-government protests.
• Abdelaziz Bouteflika, the president, won an unprecedented third term in 2009. There is no clear successor for the president, who is now 74, and there are continued rumours of a potential cabinet shuffle.
• Algeria will post fiscal deficits in the forecast period averaging 2.1% of GDP. This is smaller than our previous forecasts as we now expect oil revenue to be higher because of high international prices.
• Real GDP growth will average 4.2% in 2011-15 on the back of government spending and high oil prices. Civil unrest will dampen consumer confidence and hurt private consumption.
• Banque d'Algérie (the central bank) operates a managed float of the Algerian dinar against the US dollar. We expect the dinar to appreciate against the euro over most of the forecast period.
• Energy exports will dominate the current account. We have raised our oil price forecasts in 2011-12, pushing up the trade surplus. Algeria will record current-account surpluses from 2011-13, before moving into a deficit position.

Monthly review

• The president, Abdelaziz Bouteflika, said Algeria would face "political reforms" without providing any specifics. The prime minister, Ahmed Ouyahia, meanwhile, denied the possibility of a cabinet reshuffle.
• The industry minister, Mohammed Benmeradi, has said there will be no changes to Algeria's restrictive import policies. His finance counterpart, Karim Djoudi, said that there will be a supplementary budget in the summer.
• The establishment of a Renault plant in Algeria was said to be "well advanced". The French carmaker has long been rumoured to be setting up operations in Algeria, but the process is likely to be protracted.
• The latest oil and gas exploration licensing round failed to attract serious interest, with only two of the ten blocks on offer awarded (including one to state oil and gas company, Sonatrach).
• The energy minister, Youcef Yousfi, announced that Algeria was interested in developing its shale gas reserves. The country faces a potential supply crunch over the next few years as rising domestic consumption will cut into exports.
• Inflation averaged 3.9% in 2010, down from 5.7% in 2009. This trend is unlikely to continue as both energy and food prices will be higher in 2011.

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.

The next parliamentary election is scheduled for 2012, and we expect the results to be similar to those in the previous election in 2007, although the balance of political forces could be affected by the rise of youth-based movements along the lines of those in Egypt and Tunisia. The Front de libération nationale, historically Algeria's ruling party, will continue to lose ground as the dominant political force in the country and will probably see an internal shake-up before the election. Internal conflict within the party is growing, with reports of violent altercations between party members, and the position of the party's secretary-general, Abdelaziz Belkhadem, looks increasingly untenable. The Rassemblement nationale démocratique, the party of the prime minister, and opposition parties, including the conservative Front national algérien, will probably gain more seats in the next election. The presidential election will take place in 2014. Parliament ratified a change to the constitution in 2008 that allowed Mr Bouteflika to run for a third term; it now seems unlikely that Mr Bouteflika would be able to run for a fourth term given opposition to long-serving leaders across the region.

Algeria will continue to be a major regional ally of the West in the campaign against Islamist militancy, and will be the main military force behind efforts to weaken AQIM in its Saharan and Sahel neighbours. Relations with the EU will be stable, as Algeria supplies some 25% of the EU's gas imports and security of supply from Russia remains a concern. Relations with France will continue to be strained by underlying resentment about French actions during the colonial era and attitudes after independence, but will remain important, given that France is Algeria's largest trading partner and hosts a large Algerian diaspora. Algerian-US relations will continue to be focused on dealing with militant Islamism, and on oil exports from Algeria. Russia has also signed military equipment deals with Algeria, notably to supply fighter aircraft.

Algeria's main regional dispute stems from the lack of resolution over the disputed territory of Western Sahara. Algeria supports the main group campaigning for the independence of the territory, but Morocco is committed to maintaining sovereignty over Western Sahara. The dispute will make any meaningful Maghreb-wide economic co-operation unlikely. The government will try and build constructive relationships with the new authorities in Tunisia and Egypt. Algeria has criticised the international air strikes against Libya but is unlikely to campaign too forcefully on behalf of the Qadhafi regime.

Algeria's government will continue to lead investment in the country in an effort to diversify the economy and respond to the demands of protesters calling for political and economic changes. Restrictions on foreign investment will be maintained in 2011-15 to protect Algeria's national economic interests and to promote domestic industries, but they could be eased towards the end of the forecast period. Since 2009 the government has taken an increasingly restrictive approach towards foreign investment, adopting a variety of measures including a tougher tax regime, a limit of 49% on foreign ownership and policies to reduce the amount of imports coming into the country. These policies have been supported by the state-linked labour unions. The hydrocarbons sector will receive preferential treatment and is in need of major investment to maintain production levels, which are already below potential, and to meet delivery contracts.

The privatisation or consolidation of small state-owned firms is unlikely to proceed with much enthusiasm over the forecast period. Limited capital market financing for domestic private firms and foreign-ownership caps mean there are few possible buyers of public enterprises in any case. The state will assume a large role in the telecommunications sector as the government proceeds with its acquisition of the local mobile-phone operations of Egypt's Orascom Telecom. Algeria's private sector is comparatively small because of the security problems of the 1990s, the underdevelopment of financial services and excessive bureaucracy. The government is attempting to address these issues, but private-sector leaders have complained of the increasing role of the state in industry and of difficulties in obtaining bank finance or property.

Fiscal policy in the forecast period will be led by the state's ambitious five-year, US$286bn investment plan. This spending will focus on developing the non-hydrocarbons sector, improving infrastructure, expanding the local skills base and supporting small- and medium-sized enterprises. In light of recent protests, further ad hoc spending has been announced; expanding credit available for the agriculture sector, increasing social security and wages and granting more funding to localities to involve young people in the economy will all add to the government's expenditure bill. The government's patchy record of completing projects on budget (an earlier five-year plan was not fully spent) does not instil much confidence that this new, larger programme will be implemented fully.

According to the government, these expansionary budgets will be funded exclusively from domestic sources. The government is committed to avoiding borrowing on international markets and will be able to cover the costs by drawing on the reserves in its oil stabilisation fund, which are around AD4trn (US$52bn). Revenue from oil and gas exports will help to offset the shortfalls, although production, particularly of gas, remains below potential. We now expect oil prices to be around US$101/b in 2011 and have adjusted our forecast for Algeria's fiscal deficit to 2% of GDP. The fiscal account will record annual average deficits of around 2.1% of GDP in 2012-15 as high oil revenue is offset by increases in expenditure as the government turns its spending programme towards capital projects.

The official policy aim of Banque d'Algérie (BdA, the central bank) is to control the money supply in order to contain inflation, although it does not publish its monetary growth target. High deposits from Sonatrach will keep liquidity in Algerian banks elevated and cause broad money (M2) to expand modestly in the forecast period. The BdA will use sterilisation policies to dampen the inflationary effects of rapid money supply growth. Much of the state investment programme is likely to be financed through government-controlled banks, increasing the overall supply of credit. Private credit growth will be limited by a prohibition on retail credit aside from mortgages.

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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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Domestic price pressures will be high in 2011-12 as prices for energy and food rise. We expect prices of wheat, of which Algeria is one of the world's largest importers, to rise by around 31% this year. The monopolised import market will keep domestic prices high. The government will attempt to limit the effect of international price movements on the domestic market by imposing price ceilings, suspending import tariffs for most of 2011 and trying to manage distribution. This may push demand onto the black market, where prices for food and other imports are likely to be much higher. The government will also try to quell social unrest among state employees through pay rises, which will lead to higher nominal wages at all salary levels. We expect inflation to average 4.8% in 2011 and 4.6% in 2012. Inflation will continue to creep up in 2013-15 as the government's investment strategy takes hold.

The BdA will continue to operate a managed float of the Algerian dinar, the aim of which is to maintain exchange-rate stability, particularly with the dollar and the euro. The dinar will gain ground on the single currency, appreciating from an average of AD100.02:EUR1 in 2011 to AD90.53:EUR1 in 2015, as the euro zone continues to suffer from monetary and fiscal imbalances. The BdA may intervene to weaken the currency to limit imports of European goods and favour local producers. The dinar will weaken slightly against the dollar in 2011, averaging AD76.50:US$1 before appreciating to AD71.81:US$1 in 2012. The central bank retains sufficient foreign reserves to be able to maintain or lower the value of the dinar as it deems necessary.

Algeria's external account will continue to be dominated by oil and gas exports in the forecast period. The surplus in the trade balance will average US$23.9bn in 2011-12, up by 34.4% from 2010, as oil prices are boosted by concerns over supply from unrest in the Middle East and North Africa, and increased demand in emerging markets. The trade surplus will moderate slightly over the rest of the forecast period, as growth in imports outpaces exports owing to the government's need for capital inputs for its investment programme.

Remittances will remain an important non-merchandise inflow but will be dwarfed by non-merchandise outflows, as efforts to diversify the economy will continue to draw in foreign inputs. Profit repatriation, largely associated with the energy sector, will be the main debit on the income account, ensuring it remains in deficit despite earnings from Algeria's massive foreign assets (official and unofficial). We expect the current-account surplus to average 4.6% of GDP in 2011-12 based on high oil prices in 2011. It will then average a deficit of around 1.3% of GDP over the remainder of the forecast period as the country will require more foreign inputs for the government's investment programme.

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The president, Abdelaziz Bouteflika, opened the door to further political change in March, saying that the lifting of the state of emergency in February opened the path to "comprehensive reforms" that could not be fulfilled without "political reforms". However, the president has offered no specifics on what this might entail.

The head of the Mouvement de la société pour la paix, one of the three parties that makes up the ruling coalition, Bouguerra Soltani, called at the end of March for changes to limit future presidencies to two terms of five years each, to impose the retirement of politicians at the age of 70, and to limit the role of the army to that of a political arbitrator rather than a political player. Whether Mr Bouteflika will be prepared to accede to any of these demands remains unclear. To date, the government's concessions have disappointed those protesters who campaigned in February for a change to the governing regime. The lifting of the 19-year-long state of emergency has not prevented the continued suppression during March of demonstrations in the capital Algiers, which are still forbidden without prior authorisation. Social and economic protests intensified in March, with students, teachers, doctors, legal clerks, oil workers, chauffeurs and municipal police all taking strike action. But without any political coherence this movement is unlikely to present any threat to the regime, and can be combated by a continuation of the government's existing strategy of capping food prices, increasing salaries and trying to accelerate its plans to provide jobs and housing, especially for young people. In contrast to the mounting protests against economic grievances, a political campaign that in the first two February demonstrations drew hundreds of protesters onto the streets to call for regime change has since dwindled: a rally in Algiers on February 26th attracted about 50 people according to media reports.

Some political changes cannot be ruled out. The reversal of the legislative change in late 2008 that removed the limit to the number of terms that can be served by a president would not be a great loss to Mr Bouteflika, who is 74 years of age, has suffered severe health problems in recent years, and still has three years left of his current mandate. But root and branch change is extremely unlikely. In the past few weeks, the cabinet has pointedly closed ranks around the president. Mr Bouteflika has no intention of resigning before the end of his mandate, the foreign affairs minister, Mourad Medelci, told Dow Jones on March 7th, adding that the president would not succumb to political pressure. Speaking in public for the first time in weeks, the prime minister, Ahmed Ouyahia, told state television at the end of March that there has been no political crisis in Algeria. Further social and economic measures would soon be announced in addition to those agreed at the cabinet meeting on February 22nd, but there was no need to change the political system, he said.

Contrary to reports in some sectors of the local media, the government has not revoked the regulation limiting foreign investors to a minority stake in joint ventures with local companies. The industry minister, Mohammed Benmeradi, told state news agency, Algérie Presse Service, at the end of February that "at no moment" had the government said that the rule had been abandoned. Mr Benmeradi added that in many cases the local share can be split between more than one local company, meaning that the foreign firm is the largest shareholder. He also confirmed that despite holding a minority of the shares, management of projects is "always" with the foreign partner. The regulation continues to be criticised, as the number of new projects proposed by foreign investors has fallen dramatically since the rule was introduced in 2008. The number of proposals fell from 102 in 2008 to four in 2009, according to figures from Agence nationale de développement de l'investissement (Andi), the state agency responsible for inward investment. The number of projects proposed in 2010 was "six or seven", only "one or two" of which were finalised, according to a senior executive at one international company with a joint venture in the country.

The global economic climate has played a part in the downturn, but there is a growing feeling among investors and local analysts that the government must improve investment conditions if it is to fulfil its targets for employment creation and economic growth. It is time to "abandon" the measure, which "tarnishes the image of Algeria for nothing", according to an article in a local independent daily, El Watan, on March 21st. An eventual change in investment conditions cannot be ruled out. But it remains unlikely in the short term. Mr Bouteflika has made supporting the local economy at the expense of international investors a key policy platform in the past three years and is unlikely to want to be seen to be bending to outside pressure.

The government will announce a supplementary budget in the summer for the third year running, Karim Djoudi, the finance minister, said in late March. The budget will include new measures agreed by the Council of Ministers in the first half of the year, as well as "certain legal provisions", the details of which have yet to be announced. It will include an increase in budgeted expenditure, said Mr Djoudi. The supplementary budgets have been used before to introduce restrictive measures, so this bill will be closely watched by investors.

Among the few non-oil investments mooted by international investors, the proposed construction of a car-manufacturing plant in Algeria by Renault, a French automaker, is "well advanced", Mr Benmeradi stated in late March on national radio. The government has proposed that Renault build a plant with capacity of 100,000 vehicles a year, and has given the company a list of 50 local subcontractors that it wishes to be integrated into the manufacturing process. There is considerable scepticism among analysts and investors as to whether the plans will go ahead. A Renault plant in Algeria has been discussed for many years, but the company's decision to build a plant in neighbouring Morocco with capacity of 400,000 vehicles a year means that a plant in Algeria is not commercially justified, say analysts. The deal could be pursued for political reasons, however. The French government is keen to strengthen commercial ties with Algeria. France's special envoy and former prime minister, Jean-Pierre Raffarin, visited Algiers in February in an attempt to give political momentum to French investment in the country, and a Franco-Algerian investment forum is planned for the end of May. Algeria meanwhile is determined to develop a domestic car-manufacturing industry, in order to replace car imports, which currently number about 120,000 vehicles a year. Either way, any deal with Renault is likely to be a long way off. There are still a "tremendous amount" of questions to address, according to Mr Benmeradi, who added that industrial partnerships normally take "six to eight months" to reach an initial agreement, which is then followed "more detailed" memoranda. A similar deal is under discussion with Volkswagen of Germany, but this is at an even earlier stage of development. Partnership deals will be announced soon with German companies for the construction of agricultural vehicles, according to Mr Benmeradi. Aaber Investments, an Abu Dhabi government-linked company and the largest shareholder in Daimler, announced a joint venture with the government in March 2010 in which it said it would set up manufacturing plants with Daimler and four other German firms to build 10,000 cars and trucks a year. Daimler has also signed a deal to build trucks for Algeria's army. Production of 7,500 trucks a year will begin in the Rouiba district of Algiers in 2013, increasing to 15,000 trucks a year after four years, said Mr Benmeradi. Once the domestic car industry is up and running, the government will re-introduce consumer credit facilities, prohibited in July 2009 for all but housing loans, said Mr Djoudi on March 8th.

The evaluation of Djezzy, the local operations of Egypt-based Orascom Telecom, being carried out by a US law firm Shearman & Sterling, will be completed by the end of May, according to the telecommunications minister, Moussa Benhamadi, speaking to the Reuters news agency at the beginning of March. The merger of Wind Telecom, which owns a majority stake in Orascom Telecom, with Vimpelcom of Russia, was approved by a narrow margin on March 17th. The new company is "talking" to the Algerian government about its plans for Djezzy, according to the chief executive of Wind, Khaled Bichara. The government has made it clear that it wants to buy Djezzy, but has left open the possibility of forming a joint venture with a strategic partner.

The third upstream oil and gas round held by Alnaft, the state hydrocarbons licensing body created in 2005, has failed to improve on the poor performance of the first two rounds. Just two of the ten concessions on offer were licensed, one of those to government-owned Sonatrach, which won the contract for the Rhourde Fares concession in the Berkine basin. Cepsa, a Spanish energy company, won the other licence, for the Rhourde Rouni concession in the Sbâa basin (see table). Only four of 16 contracts were awarded in the first Alnaft round, held in December 2008 (Economic performance, January 2009) and just three of ten in second round, in December 2009 (Economic performance, January 2010).

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Algeria: Trouble at the pumps

The lack of interest from international oil companies (IOCs) in the latest round may be partly attributed to the uncertainty of the political situation in the region. Clarification meetings on the terms of the licenses took place in the early weeks of January, when there were outbreaks of civil unrest throughout the Middle East and North Africa, including Algeria. By the time bids were submitted on March 17th, two regimes had fallen in North Africa and a third was in the throes of civil war. The government argued, meanwhile, that interest in the first two rounds was affected by the global economic downturn. But according to IOCs, Algeria's contract terms remain the major barrier. Since an oil windfall tax was introduced in amendments to the hydrocarbons law in 2006, Algeria's oil and gas licensing terms have been among the toughest in the region, according to Wood Mackenzie, an energy consultancy. As Algeria's reserves become more difficult to access-particularly gas, of which remaining resources are increasingly deep and sparsely distributed-the attractiveness of these terms has diminished still further.

The government has consistently said that it will not alter its terms for upstream concessions, insisting that the lack of interest has been due to external factors. But pressure is building within the oil and gas administration for changes to the licensing regime, according to energy analysts speaking to the Economist Intelligence Unit. Any change to the terms would be politically delicate. Influential members of Algeria's traditional ruling elite, from whom the president, Abdelaziz Bouteflika, derives much of his authority, believe that oil and gas reserves should be preserved for future generations of Algerians rather than being farmed out to international companies. This resource nationalism will be difficult to overcome. But the lack of exploration in recent years is already beginning to have an impact on Algeria's ability to keep pace with demand for its oil and gas. The one notable success of the past three licensing rounds was the award to Total, a French oil and gas major, of the Ahnet block in the south-west of the country. Combined incremental production from Ahnet, the Reggane North field, which Repsol of Spain was given the green light to develop in February (Economic performance, March 2011), and the Timmimoun and Touat fields, on which development work is also under way, is expected to be more than 10 bn cu metres/year. But this may be insufficient to meet international gas supply commitments and fast-growing domestic demand, creating a potential supply crunch in 2013-14. The government has outlined ambitious plans for state investment both in upstream oil and gas and the construction of renewable energy infrastructure (Economic policy, February 2011), but these too are unlikely to be delivered in time, or in sufficient quantities, to meet the projected shortfall.

The timing of any changes to the licensing regime remains uncertain. The current high oil prices, which assure the country substantial hydrocarbons revenue from current production, mean that there is little financial incentive for the government to make changes in the short term. Equally, Mr Bouteflika will be keen not to appear reactive to the poor showing in the latest Alnaft bid round. Rumours of an imminent cabinet reshuffle have focused on a possible promotion for Youcef Yousfi, the energy minister, to the post of prime minister, which could create an opportunity for a change in energy policy. But as yet there has been no official confirmation that a reshuffle is being considered. The possibility remains that changes will only become politically palatable when the fact of the production shortfall becomes discernible on the ground.

Plans to develop Algeria's shale gas potential are likely to take even longer to reach fruition. Mr Yousfi told an energy conference in Houston in early March that the country has estimated reserves of shale gas of up to 1,000 trn cu ft. Based on a preliminary evaluation, Algeria's shale gas potential is "at least comparable" to the major operations in the US, said Mr Yousfi. Shale gas has had enormous success in the US, which in less than a decade has transformed from a country that was increasingly dependent on gas imports to one with an estimated 100 years of domestic supply. But shale gas exploitation relies on cutting-edge technology that would only be available to Algeria from foreign companies. The complex nature of the process would mean that an entirely new framework would have to be drawn up to facilitate such co-operation. According to Mr Yousfi, the government is "already talking" with some companies, and pilot tests are due to begin in 2012. But analysts say it could take several years of negotiations before a suitable framework is agreed.

Inflation for full-year 2010 averaged 3.9%, down from 5.7% in 2009, according to the finance minister, Mr Djoudi, speaking at the end of March. But food prices have risen by 15% since the end of 2010, according to figures from the Union générale des commercants et artisans algériens (UGCAA) quoted by El Watan, on March 14th. Sharp increases in food prices were blamed for provoking civil unrest in early January, after which the government introduced a series of emergency measures to try to control rising prices (February 2011, The political scene). Imports of food have increased by 35% in the past year, according to the latest figures from the Centre national de l'informatique et des statistiques (CNIS), the government trade statistics agency, rising to US$621m in February 2011 compared with US$460m a year earlier. Overall, imports fell by 10% in the two-year period to February 2011, according to CNIS.

The estimated US$3bn project to build a water pipeline from In Salah in the east of the country to the desert town of Tamanrasset in the south is due to be completed by July, according to the water resources minister, Abdelmalek Sellal. The transfer of the first water was due to be made in March, said Mr Sellal, speaking in an interview with El Watan on March 4th. The project, which involves two 750-km pipelines, is one of the longest transfer projects in North Africa. Meanwhile, companies have until June 15th to bid for the contract to build a new mosque in Algiers, the Djamaa el-Djazair. The estimated US$1.4bn mosque is set to be the third largest in the world when completed in 2014. Seven groups have been prequalified to bid for the contract, after 15 applied in October. The client is Agènce Nationale de Réalisation et de Gestion de Djamaâ el-Djazaïr (Anargema).

Despite ongoing delays to flagship projects such as the Algiers metro and the east-west motorway, the development of transport infrastructure continues to make steady progress. A joint venture between Fomento de Construcciones y Contratas, a Spanish construction firm, and a local firm, ETRHB Haddad, has been awarded a US$1.7bn contract to build a new rail line between Tlemcen in the north-west and Akkid Abbas, on the border with Morocco, MEED, a regional business publication, reported. The 66-km line is part of a scheme to build a 185-km line between Relizane, Tiaret and Tissemsilt. Bids are due by May 13th to build a 5-km extension to the tram network currently under construction in Constantine. The 8-km first phase of the network is due for completion by 2011 and is being built by a consortium of Alstom of France and Impresa Pizzaroti of Italy. Bids are due by June 12th for the design and supervision contract on the eastern extension of the Algiers tramway. The government plans to spend US$30bn on transport between 2010 and 2014, as part of its US$286bn infrastructure development plan. It plans to increase the coverage of the national rail network from 3,500 km to 10,500 km by 2014, but having already fallen behind on its targets for the 2005-09 infrastructure development programme, is unlikely to deliver on its deadline.

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Please see graphic below

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Land area

2,381,741 sq km

Population

34.4m (January 1st 2008; Office national des statistiques estimate)

Main towns

Population of main urban areas in '000s (mid-2006 Economist Intelligence Unit estimates)

Greater Algiers (incl capital): 4,825

Oran: 1,150

Constantine: 810

Annaba: 580

Climate

Temperate on the coast, hot and dry in the south

Weather in Algiers (altitude 59 metres)

Hottest month, August, 22-29°C; coldest month, January, 9-15°C (average daily minimum and maximum); driest month, July, 1 mm average rainfall; wettest month, December, 140 mm average rainfall

Language

Arabic (official); Berber language (Tamazight) and French are also used

Measures

Metric system

Currency

Algerian dinar (AD) = 100 centimes or 20 douros

Time

GMT in the winter months; GMT plus one hour in the summer

Public holidays

All Muslim holidays are observed in accordance with the lunar calendar, and the dates are therefore approximate: Prophet's birthday (February 15th 2011) Eid al-Fitr (August 30th); Eid al-Adha (November 6th); Islamic New Year (November 26th). Other public holidays: New Year's Day (January 1st); Labour Day (May 1st); Independence Day (July 5th); Anniversary of the Revolution (November 1st)

Official name

People's Democratic Republic of Algeria

Legal system

Based on the constitution of 1976, revised in 1989 and 1997

Legislature

Bicameral: the lower house, the Assemblée populaire nationale, with 389 members, was first elected in June 1997; the upper house, the Conseil de la nation, which has 144 seats, was formed in December 1997, with two-thirds of its members elected through municipal polls and the remainder appointed by the president

National elections

May 17th 2007 (legislative); April 9th 2009 (presidential); November 27th 2007 (provincial and municipal councils); next presidential election due in April 2014 and legislative election in 2012

Head of state

President, currently Abdelaziz Bouteflika, elected for a third term on April 9th 2009; Mr Bouteflika is also defence minister

Executive

Council of Ministers presided over by the prime minister, who is appointed by the head of state. A new government was formed following the May 2007 election. In May 2010 there was a major cabinet reshuffle

Main political parties

Front de libération nationale (FLN), previously the sole legal party; Rassemblement national démocratique (RND); Front des forces socialistes (FFS); Rassemblement pour la culture et la démocratie (RCD); Mouvement de la réforme nationale (Islah, Islamist); Mouvement de la société pour la paix (MSP; Islamist); Parti des travailleurs (Labour Party)

The government

Prime minister: Ahmed Ouyahia

Deputy prime minister: Nourredine Yazid Zerhouni

Minister delegate at the Ministry of Defence: Abdelmalek Gueneiza

Key ministers

Agriculture: Rachid Benaissa

Defence: Abdelaziz Bouteflika

Energy & mining: Youcef Yousfi

Environment, territorial planning & tourism: Cherif Rahmani

Finance: Karim Djoudi

Foreign affairs (minister of state): Mourad Medelci

Health & population: Djamal Ould Abbes

Housing: Nourredine Moussa

Industry, small- & medium-sized enterprises & investment promotion: Mohammed Benmeradi

Interior & local government: Dahou Ould Kablia

Justice: Tayeb Belaiz

Labour & social security: Tayeb Louh

National education: Boubekeur Benbouzid

National solidarity: Said Barkat

Parliamentary affairs: Mahmoud Khedri

Post & information & communications technology: Moussa Benhamadi

Prospective planning & statistics: Abdelhamid Temmar

Public works: Amar Ghoul

Trade: Mustapha Benbada

Transport: Amar Tou

Water resources: Abdelmalek Sellal

Central bank governor

Mohammed Laksaci