News conference of head of the IMF mission in Algeria Zeine Zeidane
Algiers - APS
The head of the IMF mission in Algeria Zeine Zeidane, said that Wednesday in Algiers that Algeria’s economic and financial position is relatively favorable, while putting a stress on the importance of larger control of the budgetary deficit.
"The economic activity has strengthened in 2014 and the real GDP growth is expected to rise to 4% against 2.8% in 2013," Zeidane told a news conference held at the end of his consultation mission in Algeria, as part of the Article IV of IMF Status.
Also, the hydrocarbon industry is expected to expand for the first time in eight years, while growth in the other sectors "remains promising" notably in the construction and services, said Zeidane who is an IMF Adviser for the Middle East.
In addition, he noted the continuous decreasing trend of inflation rate which should stand under 2% thanks to a "tightening monetary policy."
"Algeria is in the fortunate position as it formed, throughout the years, considerable financial flexibility at the levels of its external financial and budgetary position thanks to hydrocarbon resources," he underlined.
However, Zeidane voiced concern about the continuation of the progress of the budgetary deficit which is expected to be 6% of the GDP in 2014, due to the fall of hydrocarbon revenues and the high level of expenditures.
Concerning the Revenues Regulation Fund (FRR), in spite of its positive balance, it is expected to drop for the second year in a row, said the IFM representative, commending "larger rationalization of expenses" by setting up a budgetary rule to manage the oil revenues.
"The Algerian authorities should particularly cap the recourse to the FRR to cover the budget deficit and set a benchmark price close to market barrel," he said.
"The current budget position is not alarming, but Algeria may switch to a negative position in the long term," according to Zeidane.
He further reiterated the proposal made by the Bretton Woods institution to limit the 51/49% rule on foreign investments to the strategic sectors, notably hydrocarbons and ICTs.
But Minister of Industry and Mining Abdessalem Bouchouareb, announced the expansion of this rule to wholesale and retail trades.