200420 Algeria
Students scuffle with riot police during an anti-government demonstration in Algiers, Algeria, on 21 May 2019. Photo by Farouk Batiche, of Deutsche Presse-Agentur, which won first prize in the Spot News Singles category and was also nominated for the World Press Photo of the Year. Image Credit: AP

Algiers: Opec member Algeria’s gross domestic product grew 0.8 per cent in 2019, down from 1.4 per cent the previous year and far below the government’s initial forecast, the government said on Sunday, after a poor performance in the energy sector and mass public protests.

The government had projected 2.6 per cent growth for 2019.

Algeria was rocked in 2019 by demonstrations in which protesters demanded political and economic changes and the removal of the ruling elite. The government has now banned such protests as part of measures to limit the spread of the new coronavirus.

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Growth in the oil and gas sector fell 4.9 per cent last year after a 6.4 per cent drop in 2018, data from the National Statistics Bureau showed.

Algeria’s state finances rely heavily on energy earnings, which have been sliding in recent years because of lower global oil prices and a drop in domestic output due mainly to a lack of investment from foreign investors.

In a bid to reverse the trend, the government late last year approved a new energy law offering tax incentives to foreign investors.

But President Abdelmadjid Tebboune, who took office in December, succeeding longtime ruler Abdelaziz Bouteflika, ordered state energy company Sonatrach in March to cut its planned investment spending for 2020 by 50 per cent to $7 billion.

Tebboune urged his government on Sunday to take steps to diversify the economy away from oil and gas, which currently accounts for 60 per cent of the budget and 93 per cent of total export earnings.

“He called for practical measures to accelerate the implementation of a new economic model,” a presidential statement said after a Cabinet meeting, adding the model should be based on “diversification of growth and the knowledge economy”.

Algeria has long neglected industries outside energy, forcing the government to spend around $45 billion annually on imports of goods.

“We must start from the painful reality ... in order to come up with a vision of what we want to accomplish,” the statement quoted the president as saying at the meeting.

Tebboune is aiming to ease the pressure on state finances after the coronavirus outbreak, which has sent world oil prices tumbling to their lowest levels in years.

He also reduced public spending plans by 30 per cent and delayed planned projects in the non-energy sector.

Output in the non-hydrocarbon sector grew 2.4 per cent last year, against 3.3 per cent in 2018, despite a good performance in the agriculture and construction sectors and in public works, according to the National Statistics Bureau.