ALGERIA

Economic Freedom Score

25

World Rank:

157

Regional Rank:

14

Least
free 0

lgerias economic freedom score is 48.9, making its econA

omy the 157th freest in the 2015 Index. Its overall score is
1.9 points lower than last year due to considerable declines

50

75
Most

100 free

48.9

Freedom Trend
54

in investment freedom and the management of government

spending that outweigh improvements in freedom from corruption and monetary freedom. Algeria is ranked 14th among
the 15 countries in the Middle East/North Africa region,
and its score remains lower than both the regional and
world averages.
Algerias economy has been on a declining path of economic
freedom over the past five years. Having registered the seventh-largest overall score decline in the 2015 Index, the economy is now rated repressed. Public spending, bolstered by
the hydrocarbon sector, has been expanding in recent years,
undermining fiscal governance.
As policies to sustain regulatory efficiency and open markets have been neglected or even reversed, the economy has
become more dependent on the state-dominated energy sector. Tariff and non-tariff barriers, coupled with burdensome
business and investment regulations, continue to hamper
development of a more dynamic private sector and interfere
with much-needed diversification of the economic base.
BACKGROUND: President Abdelaziz Bouteflika won a fourth
term in April 2014 despite rarely appearing in public after a
2013 stroke. After the Arab Spring protests swept Tunisia
and Libya, the government introduced some political reforms,
including an end to state-of-emergency restrictions on civil
liberties that had lasted almost two decades. The socialist model adopted after independence from France in 1962
has hindered development. Formal-sector unemployment
remains persistently high, and there is a housing shortage.
Algeria is the worlds sixth-largest exporter of natural gas and
has the worlds 10th-largest natural gas reserves and 16thlargest oil reserves. The government began a five-year, $286
billion program to modernize infrastructure in 2010 and
appears to be trying to attract foreign and domestic private
investment and to diversify the economy.
How Do We Measure Economic Freedom?

See page 475 for an explanation of the methodology

or visit the Index Web site at heritage.org/index.

53
52
51
50
49
48
47

2011

2012

2013

2014

2015

Country Comparisons
48.9

Country
World
Average

60.4

Regional
Average

61.6

Free
Economies

84.6
0

20

40

60

80

100

Quick Facts
Population: 37.9 million
GDP (PPP): $285.5 billion
2.7% growth in 2013
5-year compound annual growth 2.8%
$7,534 per capita
Unemployment: 9.8%
Inflation (CPI): 3.3%
FDI Inflow: $1.7 billion
Public Debt: 9.2% of GDP
2013 data unless otherwise noted.
Data compiled as of September 2014.

99

ALGERIA (continued)
THE TEN ECONOMIC FREEDOMS
Score

RULE OF
LAW

Country

World Average

Property Rights 30.0

Freedom from Corruption 36.0
0

20

40

60

80

Rank

1Year
Change

94th
95th

0
+7.3

100

In 2014, the government introduced constitutional revisions that appear to be pro-democratic,

but few expect improvements in the generally weak, slow, and opaque judicial system. High
levels of corruption plague Algerias business and public sectors, especially the energy sector.
An estimated one-half of all economic transactions occur in the informal sector. Most real
property remains in government hands.
Fiscal Freedom 80.0
GOVERNMENT
Government Spending 38.7
SIZE

83rd
154th
0

20

40

60

80

0.5
12.3

100

Algerias modest tax revenue amounts to around 12 percent of GDP. Individual income and
corporate tax rates remain unchanged at 35 percent and 25 percent, respectively. Companies
involved in tourism and mining pay reduced rates. Other taxes include a value-added tax. Government expenditures equal 45.2 percent of the domestic economy, and public debt is below
10 percent of gross domestic product.

REGULATORY
EFFICIENCY

Business Freedom 66.6

Labor Freedom 50.5
Monetary Freedom 71.2

85th
138th
140th
0

20

40

60

80

+0.3
+2.2
+3.4

100

Despite some enhancement of the business environment, significant bureaucratic impediments to entrepreneurial activity and economic diversification persist. The labor market
remains rigid, contributing to a high youth unemployment rate. Generous but unsustainable
state spending on subsidies for food and fuel, price ceilings, and redistribution schemes to control prices have been used to stave off political unrest.

OPEN
MARKETS

Trade Freedom 60.8

Investment Freedom 25.0
Financial Freedom 30.0

164th
158th
131st
0

20

40

60

80

0
20.0
0

100

Algeria has an 8.6 percent average tariff rate. Imports of medical equipment and used earthmoving equipment are restricted. The government screens foreign investment, and regulatory
barriers discourage some investors. The financial system remains subject to government interference. State-owned banks provide over 80 percent of loans. The degree of financial intermediation remains low.

Long-Term Score Change (since 1995)

RULE OF LAW
Property Rights
Freedom from
Corruption

100

20.0
14.0

GOVERNMENT
SIZE
Fiscal Freedom
Government
Spending

+31.2
30.8

REGULATORY
EFFICIENCY

OPEN MARKETS

Business Freedom
3.4
Labor Freedom
5.4
Monetary Freedom +12.0

Trade Freedom
+6.6
Investment Freedom 25.0
Financial Freedom
20.0

2015 Index of Economic Freedom