Algeria’s trade balance: Foreseeable deterioration linked to economic structure

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ALIGERS-The deterioration of Algeria’s trade balance in the first half of 2019 was foreseeable due to the nature of the economic structure, marked by the absence of other drivers of export growth, explained Algerian economists.

Algeria, which once again saw its trade deficit widening at the end of June 2019 to reach 3.18 billion dollars against a deficit of 2.84 billion dollars at the same period in 2018, is today in the need to change course and move efficiently towards productive investment, according to experts interviewed by the APS.

In this respect, the economist Mustapha Mekideche thinks that “we will have to find efficient solutions to achieve a diversified economic growth”. This remains, according to him, a “fundamental” challenge.

In this regard, the expert pointed out that the deterioration of Algeria’s trade balance during the first six months of 2019 is “structural” and has been more global for more than a decade.

More explicitly, he said that the absence of other engines of export growth, combined with the instability of the oil market, led Algeria straight to this situation of trade deficit. “It’s mechanical!”, He said.

According to him, to get out of this situation, Algeria should move towards a policy of “significant” diversification of its economy, by reviving the industrial sector.

“Until we solve this structural problem, the situation of our foreign trade will inevitably worsen,” he warned.

This, he continued, especially as oil prices have not yet stabilized, is given the international geopolitical context and the decline in global demand for energy, resulting from the escalation of the conflict between China and the United States.

“It will, thus, be necessary to “overhaul the whole policy of re-industrialization of the national economy.”

However, according to him, this policy “does not produce foreign exchange resources for the country”.

“Algeria has put in place an economic model that absorbs more foreign exchange and that does not allow, in return, its products to position themselves in international markets,” he said.

Thus, the widening of the trade balance during the first half of the year is the result of this economic model.

To mitigate the deterioration of the country’s trade balance, the specialist in foreign trade issues, Smaïl Lalmas thinks it is imperative to encourage productive investment, business creation and strengthen the competitiveness of SMEs.

APS

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