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Algeria's Upgrade to Upper Middle-Income Country: A Technical and Comparative Analysis

Algeria has recently progressed from the status of a lower-middle-income country to an upper-middle-income country, according to the latest update of the World Bank's economy classification. This improvement is based on key indicators such as Gross National Income (GNI) per capita, economic growth, inflation, exchange rates, and demographic growth. This article delves into the technical details of this transition while comparing Algeria's situation with its neighbors.


Economic Classification and World Bank Thresholds

The World Bank classifies economies into four main categories based on GNI per capita:

  1. Low-income economies: GNI per capita of $1,135 or less.
  2. Lower-middle-income economies: GNI per capita between $1,136 and $4,465.
  3. Upper-middle-income economies: GNI per capita between $4,466 and $13,845.
  4. High-income economies: GNI per capita of $13,846 or more.

By increasing its GNI per capita from $3,900 (July 1, 2022 - June 30, 2023) to $4,960 (July 1, 2023 - June 30, 2024), Algeria has crossed the critical threshold to join the category of upper-middle-income economies.

Technical Factors Behind the Improvement

The primary factor contributing to this improvement is the comprehensive revision of national account statistics, or rebasing, conducted by the National Office of Statistics (ONS) to align with current international standards (SNA2008). This revision resulted in an average increase of 13.3% in GDP levels for the period 2018-2022. Other contributing factors include:

  • Economic Growth: Algeria has achieved significant progress in economic growth.
  • Public Investment: Expansion of public investment has played a crucial role.
  • Consolidation of Productive Economic Sectors: Efforts to strengthen these sectors have paid off.
  • Good Governance of Public Finances: Improvements have been noted in the management of public finances.
  • Methods of Measurement and Production of Statistical Data: Progress has been made in these areas, including better coverage of the informal economy.

Impact of National Accounting Revisions

Revisions to national accounting methods and data can significantly impact a country's economic classification. To maintain the income classification thresholds in real terms, they are adjusted for inflation using the Special Drawing Rights (SDR) deflator. The World Bank's revision of Algeria's position for 2025 reflects recognition of the statistical efforts made.

Comparison with Neighboring Countries

To situate Algeria in a regional context, a comparison with neighboring countries is essential.

  1. Morocco:

    • GNI per capita: Approximately $3,380 in 2023.
    • Classification: Lower-middle-income economy.
    • Factors: Stable but lower growth compared to Algeria, facing challenges in economic diversification.

  2. Tunisia:

    • GNI per capita: Approximately $4,050 in 2023.
    • Classification: Lower-middle-income economy.
    • Factors: Facing economic and political challenges that slow its progress.

  3. Libya:

    • GNI per capita: Approximately $5,350 in 2023 (estimates vary due to political instability).
    • Classification: Upper-middle-income economy.
    • Factors: Dependence on oil revenues and political instability heavily influence statistics.

  4. Egypt:

    • GNI per capita: Approximately $3,690 in 2023.
    • Classification: Lower-middle-income economy.
    • Factors: Large population and rapid economic growth but unevenly distributed.

Conclusion

The improvement in Algeria's classification in the World Bank's economy rankings is a significant step, resulting from a combination of economic reforms, public investments, and statistical improvements. Compared to its neighbors, Algeria stands out with a higher GNI per capita, surpassing countries like Morocco and Tunisia, and nearing Libya despite the latter's economic challenges. This progress underscores the importance of economic reforms and good governance in enhancing national economic indicators.



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