Algeria’s economy is bracing for a sharp downturn in 2026 as oil prices slide, exposing the limits of President Abdelmadjid Tebboune’s economic diversification strategy. The North Africa Post recently reported that Algeria risks a “bleak economic outlook” next year if crude prices remain below $70 per barrel, a scenario that would strain state finances and force tough spending cuts. With hydrocarbons accounting for 90% of export revenues and 60% of the state budget, the country’s reliance on oil and gas leaves little room for error.
The warning comes as Algeria’s fiscal buffers thin. Foreign exchange reserves, which peaked at $200 billion in 2014, have fallen to $65 billion in 2025, according to the Bank of Algeria. The government has burned through savings to fund subsidies, public sector wages, and infrastructure projects, including the $3 billion East-West Highway and the $1.5 billion Algiers Metro expansion. If oil prices stay low, Algiers may have to delay payments to contractors or trim fuel subsidies, a politically sensitive move in a country where gasoline costs less than bottled water.
Entrepreneurs and business founders are already feeling the pinch. Import restrictions, introduced in 2022 to protect dwindling reserves, have made it harder to source raw materials and machinery. The central bank’s tight control over foreign currency has led to delays in settling invoices, with some importers waiting up to six months to pay suppliers. Local manufacturers, particularly in textiles and food processing, have scaled back production as a result. “We used to import packaging from Turkey in two weeks; now it takes three months,” said Karim Boudiaf, owner of a small biscuit factory in Oran. “If this continues, we’ll have to cut shifts.”
The government’s response has been a mix of austerity and reform. In 2024, Tebboune launched the “New Algeria” economic plan, aiming to boost non-hydrocarbon exports to $5 billion annually by 2026. The plan includes tax breaks for startups, a $1 billion fund for digital innovation, and incentives for renewable energy projects. Algiers has also eased restrictions on foreign investment in non-strategic sectors, allowing 100% ownership in industries like tourism and agribusiness. However, progress has been slow. Non-hydrocarbon exports reached just $2.1 billion in 2025, far below the target, according to the Ministry of Commerce.
The diaspora is watching closely. Algeria’s expatriate community, estimated at 6 million, sends home around $2 billion annually in remittances, a lifeline for many families. But investment from the diaspora remains low, with only $300 million channeled into local businesses in 2024, per the Algerian Agency for Investment Development. “The bureaucracy is still a nightmare,” said Samir Belkacem, a Paris-based entrepreneur who tried to open a solar panel factory in Tlemcen. “I spent a year getting permits, and by the time I was approved, the rules changed.” The government has promised to streamline procedures, but many in the diaspora remain skeptical.
SONATRACH, Algeria’s state-owned oil giant, is under pressure to offset the revenue shortfall. The company has ramped up gas exports to Europe, signing a $4 billion deal with Italy’s ENI in 2023 to supply 9 billion cubic meters annually. But gas prices are also volatile, and SONATRACH’s production costs are rising as older fields deplete. The company has delayed plans to develop shale gas reserves in the Sahara, citing environmental concerns and local opposition. Without new discoveries, Algeria’s oil and gas output could decline by 15% by 2030, according to the International Energy Agency.
For now, the government is betting on short-term fixes. Algiers has tapped international bond markets twice in 2025, raising $3 billion at high interest rates. It has also negotiated a $2 billion loan from the African Development Bank to fund renewable energy projects. But these measures are stopgaps. The real test will come in 2026, when Algeria’s fiscal deficit is projected to widen to 12% of GDP if oil prices stay low, per the IMF. That would force Tebboune to choose between cutting subsidies, raising taxes, or devaluing the dinar—all unpopular moves in a country where protests toppled a president in 2019.
Entrepreneurs are adapting, but the environment remains tough. Some are pivoting to local sourcing, like Ahmed Benali, who runs a plastics factory in Setif. “We used to import 80% of our raw materials; now it’s 30%,” he said. Others are exploring niche markets. In Algiers, a group of young engineers has launched a startup producing electric scooters, targeting the growing demand for urban mobility. “The government offers subsidies for green tech, but the paperwork is still a hurdle,” said co-founder Nadia Cherif.
The diaspora could play a bigger role. Algeria’s expatriates have the capital and networks to invest, but they need clearer rules and faster approvals. The government has set up a “one-stop shop” for diaspora investors, but critics say it lacks teeth. “It’s a good idea, but the real power is still with the local officials who demand bribes,” said Belkacem. If Algiers can fix this, the diaspora could become a key driver of diversification.
Key takeaway for entrepreneurs
Algeria’s 2026 oil slump will tighten liquidity and delay payments, making cash flow management critical. Local sourcing and green tech offer growth opportunities, but bureaucratic delays remain a risk. The diaspora should push for faster reforms to unlock investment, while startups can leverage government subsidies for renewable energy and digital innovation.
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