The economic machine struggles to recover (Analysis)

AA/Algeria/Aksil Ouali

The high cost of living, the impact of fluctuating international markets, and the difficulty of restarting the economic machine… Algeria began 2022 with a dizzying rise in consumer prices, which forced the authorities in mid-February to suspend “until further notice” the application of taxes under the newly enacted law on finance.

The decision, announced by President Abdelmajid Tebbun, concerns “certain foodstuffs, imports of mobile phones and computer equipment for personal use.” In addition, the Algerian head of state announced the payment of unemployment benefits in the amount of 13,000 DA (90 dollars) from this March, intended for the unemployed (19-40 years old), in order, in his words, “to preserve the dignity of this category of citizens.”

These measures were announced in the context of a sharp increase in prices for consumer goods, which placed a heavy burden on household budgets. Anticipating, perhaps, possible social discontent, the Algerian authorities revised their cards at the economic level. But putting forward “fluctuations in world markets and the rapid rise in prices for imported raw materials” as an excuse. This is the only reason? Why is the Algerian economy struggling to get off the ground?

Last December, the World Bank noted in a report disputed by the Algerian government “that the CPI rose 9.2% year-on-year, peaking since 2012.” situation.

“The extraversion of the Algerian economy, the rise in prices of many imported staples, and the increase in shipping tariffs are other inflationary risk factors. Finally, the sharp depreciation of the dinar against the dollar and the euro contributed to the rise in the cost of most imported goods, ”analyzes economist and consultant Brahim Guendouzi in an interview with the Algerian daily newspaper Liberté.

– Risks

For an economist, “it is clear that a significant increase in prices makes it possible to buy fewer products, hence the loss of purchasing power for both the population and businesses.” In this sense, he proposes the implementation of other measures “against the inflationary spiral”.

“Recent government revenue measures (lowering the GDI and revisiting the index point for civil service wages) are in some ways part of a purchasing power catching-up logic that is in free fall. This is clearly not enough if we limit ourselves to these actions, as inflation continues to rise, especially in international markets, especially in this situation of a military crisis in Europe. Hence the need to take a set of measures to combat inflation before it takes the form of an uncontrollable spiral,” he recommends.

The effects of this inflation are strongly felt by Algerian households. The increase in prices affected almost all products and ranged from 40 to 60%. They affected both fresh products (vegetables, fruits and meat) and other staples such as pasta, canned food, etc.

“For several months, I can no longer buy the same amount of food for 1000 DA ($7) that I could afford before. My daily expenses exceed 2,000 DA without filling my basket,” a 60-year-old civil service retiree met at the Algiers Center told Anadolu Hassan. Receiving a pension of 30,000 DA ($211) a month, the man claims that “he struggled to complete the month, the value of his pension decreased so much.”

This observation about the erosion of Algerian purchasing power is confirmed in a recent study by the Association for Consumer Protection and Orientation of Consumers and Their Environment (APOCE). The latter advocates “a minimum wage of 80,000 DA ($560) to guarantee a decent life for Algerian workers.” Algeria currently has a guaranteed minimum wage (Smig) of DA 20,000 ($134).

– Tebbun undertakes to “release the initiative”

Why is the country floundering in this spiral? Why is its economy trying to recover? Since coming to power in December 2019, President Tebbun has continued to criticize the economic situation in the country, which is 95% dependent on hydrocarbon exports. He then promises “change”. In a statement in early January last year, he said “2022 will be a year of economic takeoff,” demonstrating “his commitment to unleashing initiative” in various segments of the economy.

This optimism is not shared by opposition political parties. “On a socio-economic level, the situation continues to deteriorate dangerously, plunging entire segments of the population into poverty and insecurity,” the Rally for Culture and Democracy (RCD) said in a press release last Friday.

Economics professor Abderrahman Mebtul, with his numerous publications in the local press, continues to warn of the “economic collapse of the country.” “As for a possible trade surplus in 2021, it is of limited significance, with a number of blocked projects, the implementation of which would give a trade deficit at the end of 2021,” the professor points out.

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