Presidential elections in Algeria on 17 April re-installed Abdelaziz Bouteflika for a fourth term. The frail state of Bouteflika’s health means he has effectively been made president for life. At 77, he is confined to a wheelchair and public appearances are extremely scare. He failed to campaign for his own re-election and official statements are read out on his behalf by government ministers.

No alternative

The re-election of the ailing president with 81.5 per cent of the vote showed the lack of alternatives to the man who has been at the helm since he was installed with the backing of the country’s military elite in 1999. Ali Benflis, a former member of the country’s largest party, the Front de Liberation National, won 12.2 per cent running as an independent, but his chances of success were written off before the polls. Several other candidates pulled out of the race when Bouteflika’s candidacy was announced, and some political parties boycotted the elections completely, protesting that they were not free and fair.

The government has promised to introduce a programme of constitutional reforms by the end of the year, but they are unlikely to have a great deal of impact.

The two-term limit to presidential mandates, which was removed in 2008 to allow Bouteflika to stand in elections the following year, is likely to be reinstated. Beyond that, little is known about the planned reforms, which will have been the subject of consultations with political parties and other leading figures in May and June.

What is clear, though, is that the military elite, from which real authority still derives, is unlikely to sanction fundamental changes.

Modest growth

The government has failed to deliver on its economic growth and diversification programme.

Algeria has been relatively insulated from the global downturn in recent years and boasts abundant hydrocarbons resources, but GDP expansion has been modest. Growth was just 3.3 per cent in 2012 and an estimated 2.7 per cent in 2013, with expected growth of 4.3 per cent in 2014, according to the Washington-based IMF.

The military elite, from which real authority still derives, is unlikely to sanction fundamental changes

Of particular concern is the government’s budget deficit, which is running at more than 20 per cent. This is covered by oil income over and above that earned from budgeted oil earnings, which are based on a nominal oil price of $37 a barrel, but is unsustainable in the long term. Algeria’s actual breakeven price is more than $100 a barrel. The government has accumulated reserves of almost $200bn, but the trend of growing reserves has reversed, and they are likely to be eroded to $185bn by 2018, according to the IMF.

Unemployment remains high, at about 10 per cent, while youth unemployment is well over 20 per cent, a serious problem for a country where 70 per cent of the population is aged 35 or below.

Ambitious targets

Algeria’s economy still relies overwhelmingly on income from oil and gas, with more than 96 per cent of export income generated from hydrocarbons. Energy Minister Youcef Yousfi announced in January that the government expects gas production to double and oil production to increase by 50 per cent in the next 10 years. Ambitious targets have been announced before and not reached, and it is likely the latest plan will suffer the same fate.

Upstream oil and gas activity has languished in recent years. Only a quarter of the blocks offered in three upstream rounds since the creation in 2005 of a new licensing body, Alnaft, were actually awarded. In January, Alnaft launched its fourth licensing round, with 31 licences on offer across the country including 17 for shale gas. Bids will be opened on 6 August and contracts signed by 5 September. Meanwhile, domestic energy consumption is rising rapidly, and oil and gas exports have declined in the past 10 years.

The energy ministry also has ambitious plans for downstream development in the hydrocarbons sector. It has set out a programme for the construction of five new refineries and a new petrochemicals complex worth $5bn-$10bn. Again, though, the plans are an echo of a similar programme set out in 2005, none of which has been realised.

Plans to build an ethane cracker, for which a joint venture agreement was signed with France’s Total in 2005, appear to have been shelved.

The government has repeatedly stated its intention to diversify the economy, but has failed to do so. Foreign investment is weak, while total private investment was just $7.7bn in 2013.

Steel projects

Among the few major investments under way outside the oil sector are a steel plant for which Qatar Industries entered a joint venture agreement with the Algerian government in January 2013, and the $720m rehabilitation of another steel complex, operated by Luxembourg’s ArcelorMittal. The $2bn first phase of the Qatar Industries project will produce 2 million tonnes a year (t/y) of steel, with production eventually rising to more than 5 million t/y. Commercial production is due to begin in 2017.

France’s Renault is also building the country’s first car manufacturing plant, with an annual capacity of 25,000 vehicles. The plant is due for delivery by the end of 2014.