Algeria

Algeria enters 2026 on hydrocarbon-funded momentum that is starting to fray at the fiscal edges. Real GDP grew roughly 3.8% in 2025, with the non-hydrocarbon economy expanding a healthy 5.4% in the first half, while inflation that had collapsed toward 1.7% in early 2025 has since crept back to 4.9% by April 2026. The catch is the budget: the IMF's September 2025 Article IV put the fiscal deficit near 11.5% of GDP, reserves swung from $51.4bn to $39.6bn mid-year before recovering to roughly $47bn, and the official dinar trades around 130 to the dollar against a parallel rate near 240.

The investment thesis is diversification financed by gas. Sonatrach's July 2025 $1.35bn production-sharing contract with Eni anchors expanded LNG and pipeline flows to Italy and the EU, while the 2024 hydrocarbon bid round — the first since 2014 — opened six onshore blocks under friendlier fiscal terms. Beyond gas, the Gara Djebilet iron-ore mine launches its first ~4 Mt/yr processing unit in 2026, the Bled El Hedba phosphate-fertilizer complex targets multi-million-tonne output, the Stellantis plant at Oran is scaling toward 90,000 vehicles, and a 15 GW solar program feeds ambitions to supply Europe via the SoutH2 corridor.

The defining risk is structural over-reliance on hydrocarbons colliding with a deteriorating fiscal position. Roughly half of government revenue and over 90% of exports come from oil and gas, so the 2025 drop in export earnings translated directly into double-digit deficits, depleted buffers and an IMF 'high' sovereign-stress rating. Layered on top are a heavy state footprint, unpredictable regulation, bank NPLs above 20%, a persistent FX premium, and drought-driven food-import exposure.