Strategy Note /
Algeria

Algeria: Weak President, formidable challenges

  • Algeria has a new President who has limited popular support amidst ongoing protests.

  • We see no path to a civil war-type of environment, as seen in the 1990s, at this stage.

  • President Tebboune will have to balance a number of interests including demand for political reform & welfare.

Algeria: Weak President, formidable challenges
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

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Tellimer Research
14 December 2019
Published byTellimer Research
Algeria has a new President who has limited popular support (in an environment of ongoing protests), which will make it all the more challenging for the country to address its acute problems, absent a major upswing in oil and gas prices. 

The risks we first wrote about in March 2019 of domestic disruption, fiscal stress and potential negative spillovers (protest contagion, insecurity, undocumented migrants, gas supply disruption) for Algeria’s neighbours (eg Morocco, Tunisia, and the southern EU states) likely persist. 

However, we see no path to a civil war-type of environment, as seen in the 1990s, at this stage. The deep state (Le Pouvoir) has likely re-established sufficient internal unity (since the leadership changes in the army, police and security agencies in 2H18 and the end of the 20-year presidency of Bouteflika between mid-2018 and April 2019) and the lessons for both Islamists (gradualism is advisable) and Le Pouvoir (economic disruption can be massive) from the Egyptian experience post-2011 are stark.
 

Algeria’s newly elected President Tebboune will have to balance a number of irreconcilable interests:

(1) The mass population’s demand for political reform (a shift towards a more empowered and representative Parliamentary system) and the old guard, deep-state, Le Pouvoir standing in its way (led by eminence grise, General Ahmed Gaid Salah).
 
(2) The mass population’s demand for welfare (subsidies and low taxes) and the fiscal realities of lower oil and gas revenues (fiscal deficit will average 7% of GDP over 2019-20, according to IMF forecasts, with nearly 50% gross government debt to GDP).
 
(3) Foreign oil companies, whose capital and technology is needed to develop the oil and gas sector and the vested interests of the domestic commercial elite (as well as popular suspicion of foreign, particularly French involvement, in this sector).
 
President Tebboune won the 12 December election with 58% of votes, but with merely 41% official turnout (the lowest ever) and in competition with four other establishment-aligned candidates. He is a former interim Prime Minister (in 2017) and cabinet minister (housing, communications, local government) during the Bouteflika era. 
 
Protests, which have been ongoing since early 2019, continued in the weeks before and immediately after the election.