November 15, 2008 / 6:20 PM / 10 years ago

UPDATE 1-IMF urges more flexibility in Algerian economy

(Adds IMF growth forecast, paragraph 8, quote, 11)

ALGIERS, Nov 15 (Reuters) - The world financial crisis will not significantly affect OPEC member Algeria but economic policy must be flexible to cope with any big decline in oil revenues, the International Monetary Fund (IMF) said on Saturday.

The banking system of the north African country is little exposed to international financial flows and so is protected from contagion from the global crisis, state news agency APS quoted IMF official Joel Toujas-Bernate as saying.

But any strong drop in oil earnings could hit growth in Africa’s third biggest economy by slowing state investment, he said.

“This context requires greater flexibility in macroeconomic policies to limit the impact of the oil price decline on the economy and support the growth,” Toujas-Bernate was quoted as saying.

Oil and gas sales abroad account for about 97 percent of Algeria’s total exports.

Algerian Finance Minister Karim Djoudi said last month his ministry had set up a commission to monitor possible harm to the country’s economy from the world financial crisis.

He said last week that Algeria might change its medium-term economic plans if oil prices kept falling sharply, but reiterated it was shielded from global financial turmoil.

Toujas-Bernate said he expected in 2009 the non-hydrocarbon sector of the economy would grow by 6.0 percent and the economy overall would grow between 2.5 and 3 percent, APS reported. He estimated inflation would be less than 4 percent.

The Algerian budget law for 2009 projects 3.5 percent inflation and overall economic growth of 4.1 percent.

Toujas-Bernate said the crisis “underscores the need to diversify the Algerian economy, still very dependent on the hydrocarbon sector, while productivity remains relatively weak compared to partner countries and unemployment remains very high among the young.” (Reporting by Hamid Ould Ahmed; editing by William Maclean and Patrick Graham)

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