Algeria is rich in history and has multiple geographical, human and economic assets that make it a strategic country with high potential. Located in the heart of North Africa, and at the crossroads of Africa, Europe and Asia, with an area of nearly 2.38 million km² (the largest country in Africa and the Mediterranean region), Algeria has a diverse geography rich in natural resources that lends it undeniable geostrategic potential. The territory offers a great diversity of landscapes: the mountainous regions of the Atlas and the fertile plains of Tell have agricultural land and provide direct access to the Mediterranean, on a coastline of more than 1,600 km; while the Sahara, a vast desert covering more than 80% of the territory, is home to immense reserves of hydrocarbons (oil, gas) and other natural resources. Algeria shares borders with six Maghreb and Sahelian states, in addition to Western Sahara. Algeria thus combines natural wealth and a central geopolitical location, making it a key player in energy and regional security. However, it faces several structural and economic challenges.
The Algerian population was estimated at approximately 46.7 million inhabitants in 2024, with a population growth of 703,000 people (1.52%) in 2023, a growth that has been declining since 2017.[i] The population is predominantly young (nearly 60% under 30) and urbanized (75%), concentrated in the north of the country. The increasingly educated youth embody a creative energy that brings hope. Algerian society is marked by a rich cultural diversity, influenced by Berber, Greco-Roman, Arab, Ottoman and French civilizations. The official languages are Arabic and Tamazight (Berber), recognized as a national language in 2016. Algerians seek to reconcile a plural identity, torn between conservative traditions and modernity, in a country where religion is omnipresent. Islam is the dominant religion, enshrined in the Constitution as the state religion. It profoundly influences culture and daily life. However, there are religious minorities, including Christians and Jews, although the latter have declined significantly over the decades.
Hopes for a democratic transition
have been hampered by authoritarian
policies under the presidency
of Abdelmadjid Tebboune
The political situation in Algeria remains marked by a strong centralization of power and persistent tension between the authoritarian regime, dominated by the army, and democratic aspirations, notably those of the Hirak, a protest movement born in February 2019 against Abdelaziz Bouteflika’s candidacy for a fifth presidential term. Hopes for a democratic transition have been hampered by authoritarian policies under the presidency of Abdelmadjid Tebboune, elected in December 2019 and re-elected in September 2024: restrictions on public freedoms, pressure on the press, and arrests of activists and journalists illustrate a hardening of authoritarianism that tends to stifle any criticism of the leadership.
Economically, the country has positive development prospects. The country has the third largest GDP in Africa, estimated at USD 260.1 billion according to the IMF, with the highest GDP per capita in the Maghreb, at USD 5,130, and a low external debt of 1.3% of GDP in 2024.[ii] In 2023, Algeria recorded growth of 4.1%, driven mainly by the performance of hydrocarbon production and the surge in energy prices caused by the war in Ukraine. Algeria, a member of OPEC since 1969, is one of the main producers of oil and natural gas, with the 10th-largest natural gas reserves in the world. Europe’s second largest gas supplier after Norway, it uses two gas pipelines – the Transmed, which transports natural gas (to Italy), and the Medgaz (to Spain) –, whereas the Maghreb-Europe Gas Pipeline which crosses Morocco has been closed since October 2021. Since the Ukrainian crisis, Algeria has increased its production to meet European demand, in search of alternatives to Russian gas.
In any case, Algeria is heavily dependent on hydrocarbons, which represent 90% of exports, 60% of budget revenues and 30% of GDP,[iii] making it extremely vulnerable to fluctuations in energy prices on the global market. This dependence has caused several crises, particularly after the oil shocks of 1986 and 2014. The latter led to a serious financial crisis in the country, and forced the authorities in 2020 to cut the state budget by 50%,[iv] revealing the fragility of the poorly diversified rentier economic model. Despite some progress, unemployment, particularly among young people (15-24 years old), which stands at 29.8%,[v] and social inequalities persist, pushing young people to emigrate, mainly to Europe, in search of better prospects.
In the tense political and socioeconomic context marked by 13% inflation in 2023 due to the successive crises of Covid-19 and the war in Ukraine, the Tebboune government increased food subsidies and, in March 2022, introduced an unemployment benefit of 13,000 dinars (approximately 82 euros) for job seekers aged 19 to 40, including social security coverage – a first in the country’s history. These measures were made possible by the increase in energy revenues, also allowing Algeria to stabilize its public finances and cushion the impact of inflation. Algeria also achieved upper middle-income status in 2024.
However, the persistent dependence on hydrocarbons remains a major obstacle to economic stability. To address this, the State is investing in agriculture, renewable energy, and manufacturing to diversify the economy and strengthen food sovereignty and security. Among the flagship projects: the exploitation of the Gara Djebilet iron ore mine, one of the largest in the world,[vi] with the Chinese consortium (CMH), and the launching of a 950-km railway line to transport ores to industrial sites in the north.
In 2024, the State launched two mega agrifood projects: a contract signed with the Italian Bonifiche Ferraresi (BF) for the production of cereals and legumes on a tract of 36,000 hectares, with a pasta manufacturing unit in Timimoun; and another with the Qatari group Baladna for the production of powdered milk and red meat in an area of 117,000 hectares in Adrar.[vii] The Sahara, rich in sunshine, offers strong potential for solar energy, offering the opportunity to diversify the country’s energy mix.
Economic momentum remains below expectations,
far from meeting local consumption needs
and absorbing the mass of young workers
Reforms have been undertaken over the past five years to attract local and foreign investment, in particular the partial repeal of Law 49/51,[viii] the 2022 Investment Law, which offers tax and customs duty exemptions, and the creation of the Algerian Investment Promotion Agency (AAPI). However, economic momentum remains below expectations, far from meeting local consumption needs and absorbing the mass of young workers. The country’s economic development is still hampered by bureaucracy, a lack of transparency, and an unfavourable business climate.
The Algerian economy is also weakened by the scale of the black market and the informal economy, which disrupt price stability and contribute to the depreciation of the dinar. To build a resilient economy less dependent on hydrocarbons, increased efforts are necessary. The state must accelerate the modernization of infrastructure – industrial zones, road and rail networks, ports, and airports – and thoroughly reform and modernize the outdated banking system, which is ill-suited to the demands of the global market. Furthermore, the country’s natural and cultural wealth (historical sites, architecture, traditions) offers significant tourism potential, which is still largely underexploited.
Diplomatically, Algeria aims to regain a central role on the regional and international stage after several years of withdrawal linked to internal difficulties. It is banking on three levers: its energy power, its diplomatic heritage from the Non-Aligned Movement, and its military capabilities. Algiers has been putting its experience in the fight against terrorism and mediation to good use, as evidenced by its role in the 2015 Malian peace agreement, known as the Algiers Agreement. In a context of global energy crisis, it is strengthening its partnerships with Europe by increasing its gas production and the supply capacity of the Transmed gas pipeline to Italy. Algiers is engaged in cooperation for the production of renewable energy such as the SoutH2 Corridor, signed with Tunisia, Germany and Austria, for the production of green hydrogen.[ix] Another project has been launched with Abuja and Niamey for the construction of a 4,400-km trans-Saharan gas pipeline which will link Nigeria to Algeria via Niger, to transport gas intended for the European market.[x]
In terms of security, Algiers has the 26th-largest army in the world and the second largest in Africa,[xi] and is investing heavily in modernizing its forces, with a rapidly growing defence budget, reaching $25 billion by 2025. This military power aims to contain multiple threats on the Sahelian and Libyan borders, which are rife with instability and the rise of terrorism and trafficking of all kinds, while maintaining a deterrent posture in an unstable geopolitical environment.
However, Algerian diplomacy is evolving in a tense climate, particularly with Morocco, due to the conflict over Western Sahara. The American recognition of Moroccan sovereignty over this territory in December 2020, in return for the normalization of relations between Morocco and Israel, led to an escalation of tension between Algiers and Rabat which culminated in the Algerian decision to break off diplomatic relations with Morocco and close its airspace, while the land borders have been closed since 1994. Tensions also extend to Spain and France, because of their positive shift towards Morocco in 2022 and 2024, respectively.
Algerian diplomacy has also been put to the test by the deterioration of relations with Mali since Assimi Goïta came to power following the 2021 coup. The latter officially rejected the Algiers peace agreement and distanced himself from Algerian mediation, due to differences over the management of the conflict with the Tuareg rebels, now described as terrorists by Bamako. Furthermore, the war in Ukraine has exacerbated tensions between Russia and Western countries, which criticize Algiers for its proximity to Moscow – its main arms supplier – and to China, which has become its largest trading partner, with a nearly 23% market share.[xii] Despite these pressures, Algiers continues to pursue a balanced diplomacy and seeks to strengthen its partnerships with the United States and the European Union.
Conclusion
Algeria is now at a decisive turning point in its contemporary history. Boasting impressive assets – a territory rich in energy resources, a young and educated population, and a unique geostrategic position – it possesses the necessary tools to assert itself as a regional power and an essential economic partner in Africa and the Mediterranean.
The Algerian state must anticipate
the depletion of its gas and oil reserves
and the decline in demand due
to the shift toward renewable energies
However, this potential is facing profound structural challenges inherited from a political and economic model that is still too rigid. The Algerian state must anticipate the depletion of its gas and oil reserves and the decline in demand, particularly from Europe, due to its strategic shift toward renewable energies. The success of its transition will depend on its ability to diversify its economy, modernize its institutions, and strengthen its diplomacy in a complex regional environment. The coming years will be decisive in meeting the aspirations of a young and demanding population.
[i] Source: “Population totale de l’Algérie de 2014 à 2028,” Office National des Statistiques (ONS) d’Algérie, via Statista, https://fr.statista.com/statistiques/687689/population-totale-algerie/.
[ii] “Algérie: Indicateurs et conjoncture,” Direction générale du Trésor, France: www.tresor.economie.gouv.fr/Pays/DZ/indicateurs-et-conjonctures.
[iii] “Business Risk Dashboard: Algeria,” COFACE. www.coface.com/news-economy-and-insights/business-risk-dashboard/country-risk-files/algeria.
[iv] “Algérie: le budget de fonctionnement de l’État réduit de moitié,” Le Parisien, 3 May 2020. www.leparisien.fr/international/algerie-le-budget-de-fonctionnement-de-l-etat-reduit-de-moitie-03-05-2020-8310129.php.
[v] Source: World Bank. https://data.worldbank.org/indicator/SL.UEM.1524.ZS?locations=DZ.
[vi] Mebtoul, Abderrahmane. “Algérie: impact et rentabilité de l’exploitation de la mine de Gara Djebilet, 2e réservoir de fer au monde,” Financial Afrik. www.financialafrik.com/algerie-impact-et-rentabilite-de-lexploitation-de-la-mine-de-gara-djebilet-2e-reservoir-mondial-de-fer/.
[vii] “Adrar: 1st phase of Algerian-Qatari powdered milk production project begins,” Algeria Press Service, Algeria, 4 September 2024. www.aps.dz/en/regions/53858-1st-phase-of-algerian-qatari-powdered-milk-production-project-begins.
[viii] The law requires foreign investors to be in partnership with an Algerian resident.
[ix] Ouali, Aksil, “SoutH2 Corridor: l’Algérie, la Tunisie, l’Italie, l’Allemagne et l’Autriche signent une déclaration commune,” Anadolu Ajansi, 21 January 2025. www.aa.com.tr/fr/afrique/south2-corridor-l-algerie-la-tunisie-l-italie-l-allemagne-et-l-autriche-signent-une-declaration-d-intention-commune/3458469.
[x] “Alger, Abuja et Niamey signent des accords pour accélérer la réalisation du gazoduc transsaharien,” Le Monde, 12 February 2025. www.lemonde.fr/afrique/article/2025/02/12/alger-abuja-et-niamey-signent-des-accords-pour-accelerer-la-realisation-du-gazoduc-transsaharien_6543396_3212.html.
[xi] “2025 Military Strength Ranking,” Global Firepower. www.globalfirepower.com/countries-listing.php#google_vignette.
[xii] “Commerce extérieur de l’Algérie,” Direction générale du Trésor, France. www.tresor.economie.gouv.fr/Pays/DZ/commerce-exterieur-de-l-algerie.
Header photo: The 7th GECF Summit Concluded with the Algiers Declaration: Natural Gas for a Secure and Sustainable Future. 02 Mar 2024 Algiers, Algeria. Source: https://www.gecf.org/