A CGEM analysis of the impact of the financial crisis on the Algerian economy

Abstract

Over the past decade, the global economy has gone through a severe recession triggered by a financial catastrophe and the slowdown of global commercial and industrial activity. This slowdown has weighed heavily on global economic growth. Algeria, which is not fully integrated into the international economy, feels the impact of the economic slowdown but on a level much more timid than that experienced by Europe. Algeria has all the potential human and material resources to be a pivotal country in development the Euro-Mediterranean and Arab-Africa. This requires development based on a coherent economic policy. This study conducts a Computable General Equilibrium Model (CGEM) analysis of the impact of the financial crisis on the Algerian economy with particular focus on hydrocarbon revenue. The analysis seeks to simulate the effects of decline in oil prices by 50%. The results of the model used in this study show that the state budget and investment heavily suffer for the effects of the financial crisis. The study concludes that the structural weaknesses of the Algerian economy remain extroverted and strongly oriented towards the exploitation of unprocessed raw materials.