Hydrocarber Industry Advantages And Disadvantages

Decent Essays
(+) Strong external and fiscal position
Thanks to recurrent large hydrocarbon-based trade surpluses, Algiers has accumulated large foreign exchange reserves (about USD200bn) and fiscal savings (about USD 70bn) that boost its resilience against external and domestic shocks.
(-) Narrow economic base centered around the hydrocarbon sector
Due to its dependence on the hydrocarbon sector, which generates about 40% of GDP and 97% of exports, Algier’s economy is strongly exposed to a fall in oil and gas prices. Moreover, export destinations are hardly diversified, as most exports go to the euro area.
(-) Business climate not conducive to private sector growth
Algier’s economy is dominated by the public sector, which redistributes hydrocarbon revenues via subsidized prices, welfare programs and employment opportunities. The private sector is small and suffers from outdated regulation, bureaucracy and weak competitiveness.
Risk Assessment
Algiers development rate backed off slightly in 2016. Regardless of the fall in the nominal
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Despite political setbacks, the country has been thriving economically due to it’s humongous amounts of natural resources. The city is rich in petroleum and natural gas, which allows it to grow in today’s economy with it’s high demands for oil as transportation fuel. Algier’s economic strength comes in as a source of the world’s oil and a growing economic power in Africa due to a recent industrial revolution. However, aside from fossil fuels and mining, the city has no other industries that serves as a backup if the petroleum industry experiences a period of low demand. In the past, during times of decreased oil prices, Algiers has suffered tremendously from virtually zero national income. Such economic risk is certainly a weakness of Algier’s one-dimensional economy, for it is too dependent on one industry to be able to achieve a reasonable level of
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