Algeria's presidential polls raise reforms optimism

The Algerian economy is cruising along in low gear, but investors are hoping that presidential elections in April 2014 will speed up economic and social reforms.

The North African country's economy is expected to expand 3.1% in 2013 and 3.7% next year, compared to the 3.3% growth achieved last year.
"Algeria has enormous possibilities to boost its economic growth, including huge foreign-exchange reserves derived from oil and gas," said the African Development Bank.
"A development strategy targeting stronger, sustained growth would create more jobs, especially for young people, and alleviate the housing shortage the country is facing. The national strategic option is therefore to revitalize the process intended to diversify the economy starting with the non-oil sector while deepening the reforms needed for the structural transformation of the economy."
Algeria escaped the worst impact of the Arab Spring revolution that swept across North Africa, as the government raised public sector wages and government spending to stave off a political crisis, which was beginning to flare up
With the help of steady hydrocarbon revenues flowing into the economy, Algeria has been able to navigate through a tough external environment.
And efforts are under way to diversify the economy away from oil and gas revenues. The authorities funded 90 non-oil and gas development projects at a cost of USD 9.64 billion in the first half of the year - 55.2% higher than the corresponding period last year.
Authorities are also reportedly looking to raise government spending by 11.3% in 2014 in the hope of stimulating the economy further.

OIL & GAS

Despite major efforts to encourage the private sector, the state-led oil and natural gas sector dominates the economy. The country produced 1.25 million barrels of crude oil per day, and another 620,000 barrels per day of condensate and natural gas liquids last year.

Algeria has 12.2 billion barrels of proven oil reserves, found primarily onshore, as the offshore riches remain largely under-explored.
"The government recently approved amendments to Algeria's hydrocarbon law that included fiscal incentives for foreign companies to invest in untapped exploration areas, particularly offshore and in areas believed to contain unconventional resources," said the US Department of Energy.
The new law could help attract more investments into the industry, which is currently dominated by state-owned Sonatrach - making up 80% of the country's oil and gas assets.
Major international players present in the country include Spanish oil and gas company CEPSA, United Kingdom's BP, Italian giant Eni, Spain's Repsol and France's Total SA.

But big oil remains wary.
"Despite the implementation of a new hydrocarbon law in March 2013, Algeria's oil and gas sector has failed to attract significant foreign investor interest over the past several months," said Maplecroft, a global risk and strategic consulting firm.
Terrorists attack on BP and Statoil-owned Amenas gas plant in January also did not bolster investor confidence.
"Corruption scandals involving state-owned oil and gas companies Sonatrach and Sonelgaz, and increased security risks following the Amenas terrorist attack have dampened foreign investor interest, Maplecroft said. "Maturing oil fields have in turn counteracted the production from new fields coming on stream."

OFFSHORE POTENTIALS

Despite Algeria's poor business framework, oil companies are eyeing the country's offshoreNike x Fragment Women