Algeria – Turnout Reveals Persistent Discontent

Local elections held this month attracted more voters than the parliamentary elections in June, but turnout was still less than 40%, and the incumbent FLN again lost electoral ground. Perhaps more troubling for President Abdelmadjid Tebboune and the political establishment in Algiers, the big winner among the opposition parties was the FFS, which had boycotted the parliamentary elections, but managed to win absolute majorities in 43 municipalities, many of them located in the troubled Kabylie region that is home to most of the country’s minority Berber population.

Controversy over the presence of the Berber flag at Hirak protests in 2019 brought renewed attention to the threat to stability posed by Berber nationalism. The arrest of members of the separatist MAK on charges of building car bombs led to the group’s official designation as a terrorist organization. The French government’s refusal to extradite the exiled leader of the MAK is one of several issues that has contributed to deteriorating relations with France, and alleged Moroccan support for the Berber separatists likewise played a role in Algeria’s decision to sever diplomatic ties with the regime in Rabat.

Thus far, the most significant fallout from the deteriorating relationship between the North African rivals is Algeria’s refusal to renew an agreement to transport gas to Spain via the GME pipeline. Picking diplomatic fights might help to lift the government’s popularity on a temporary basis, but in terms of the economic impact, it is hard to see how the closure of the GME might benefit Algeria, beyond whatever satisfaction officials in Algiers might take from the economic losses and energy shortages the move creates for Morocco.

Tebboune reshuffled the Cabinet following the June elections and the government headed by Aïmene Benabderrahmane has drawn up an “action plan” to address the structural impediments to investment that have prevented Algeria from achieving its full economic potential and to address the lack of transparency that has facilitated the “systematic looting” of the country’s resource wealth. Toward the end, the action plan includes proposed reforms of the judicial system and calls for aggressive steps to eliminate bureaucratic obstacles and bring greater clarity and certainty to the rules governing investment.

Investors may adopt a wait-and-see approach, given Algeria’s poor track record when it comes to delivering on promised reforms. A policy anchor such as a formal agreement with the IMF would certainly help to boost confidence, but Tebboune is unwilling to surrender the freedom to adapt policies according to shifts in the domestic political mood. The recent announcement of tax cuts aimed at dampening discontent over rising inflation may help to keep social tensions in check, but it also highlights a penchant for policy improvisation that will understandably give investors pause.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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