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Economics: Inflation pressures have subsided

Algeria’s economy has been growing at a pace of around +3% over the past three years. Growth has been driven by the non-hydrocarbon sector and in particular public sector spending, while the hydrocarbon sector has been contracting. The IMF estimates that growth will accelerate slightly in 2014-15 to around +4%. 

Inflation spiked to 8.9% in 2012 – the highest level in 15 years – following a surge in current spending. Since then, the inflation dynamics have improved, thanks to tighter monetary and fiscal policy, and inflation fell to 3.3% in 2013. But the recent surge in credit and increases in public sector wages pose a risk to the inflation outlook, and the IMF forecasts that inflation will rise to around +5%yoy by end-2014. 

Source: Goldman Sachs, The world cup and economics 2014

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