Algerian GDP growth in 2015, preliminarily estimated at 3,9%, is was slightly higher than the 3,8% recorded in the previous yeare. Hydrocarbon production increased by 0,4% in real terms, thanks to the gas component; for its part, the non-hydrocarbon part grew by 5,5% in real terms. The push came both from agricultural production, which rose by 7,6% thanks to good rainfall, and from industry, which accelerated to +4,6%, mainly supported by metalworking (12,4%).. In 2016, the hydrocarbons sector is expected to grow by 1%, while the non-hydrocarbons sector by +4% for an overall growth forecast by the International Monetary Fund (IMF) at 3,4%. The less favorable agricultural season that is looming, however, implies downside risks for the non-hydrocarbon GDP and for the local economy as a whole.
As reported by Intesa Sanpaolo, over the past two years, the dinar has lost about a third of its value against the US dollar (close to DZD 110:1 USD). The depreciation pushes were not opposed by the authorities in order to limit the impact on the economy of the drop in oil prices. And unless oil tests new lows, the exchange rate against the dollar is seen stabilizing around the current quotations for 2016. In 2015, due to the drop in revenues from hydrocarbons, which contribute more than half of the state budget, the public deficit more than doubled to 15,3% of GDP. Analysts predict that the deficit will decrease modestly in 2016, reaching around 14,5% of GDP: the current fiscal policy does not appear sustainable in the medium term considering, among other things, that the life cycle of energy wealth is short.
The current account deficit of Libra rose to 20 billion in the first nine months of 2015, from 4,6 billion in the same period of the previous year. From January to September, the financial account went into deficit, 1,5 billion from a surplus of 0,9 billion in the same period of 2014, mainly due to direct disinvestments from abroad (-1,3 billion the net balance of the IDE). At the end of 2015, foreign exchange reserves fell to 142 billion from 177 billion a year earlier. Algeria also has resources set aside in the Sovereign Fund which at the end of March 2016 had a capitalization of 50 billion, down from around 75 billion at the end of 2014. However, the reserves guarantee ample coverage of the 2016 external financial requirement (26 billion per a reserve cover ratio of 5,5, in any case halved compared to 2015).
In TunisiaInstead, GDP growth slowed to 0,8 in 2015, despite the sustained trend in agricultural production (especially olives, dates and citrus fruits). The slowdown was mainly due to the collapse of tourism which weighed on various services, a factor which will continue to weigh on the local economy also during this year. The less favorable climatic conditions will lead to a contraction in agricultural production, after the record year for olive oil 2015. For the manufacturing sector, however, an increase in demand is expected from important European markets such as France and Italy. GDP growth is expected to slow down further in 2016 (+0,5%).
In 2015, the average inflation rate was 4,9%, unchanged from the previous year. The weakness of domestic demand and the limited dynamics of hydrocarbon costs are expected to lead to an average inflation rate falling to 2016% in 3,5. The Central Bank cut the reference rate by 50bps last October, bringing it to 4,25%. The dynamics of inflation, expected to remain below the reference value and the weakness of the economy will probably lead to further rate cuts in 2016. At the same time, in 2015 the real effective exchange rate appreciated by 5%, reaching above above the long-term average. In the 2015 Art IV Report, the IMF highlighted an overestimation of 9% with respect to the equilibrium value.
Despite the further contraction in subsidy spending, the deficit of the central government, due to the limited growth of the economy, rose to 4,8% of GDP in 2015 from 4,1%. According to analysts, in 2016 the target deficit of 3,9% of GDP agreed with the IMF will be unlikely to be achieved, in a scenario where Tunisia's public debt to GDP ratio has risen by 10pp over the past five years (to 54% of GDP). And despite the significant contraction in the trade deficit, in 2015 the current deficit remained high, equal to 8,7% of GDP compared to 8,9%, due to the collapse of tourism revenues (to 1,3 billion from 1,9). At the end of December 2016, the assets in foreign currency of the Central Bank amounted to 7 billion, then dropped to 6 billion in mid-April 2016. This figure compares with an estimated 2016 financial requirement of 11,8 billion. Lately the authorities have reached a preliminary agreement with the IMF for the granting of an Extended Fund Facilities (EEF) for an amount equal to 2,8 billion. Hence Fitch, which assigns a BB- rating to sovereign debt, has recently revised its outlook negatively, highlighting internal and external political risks and the weakening of the fiscal position.
