Algeria vs. Mali

Algeria's economy remains dominated by the state, a legacy of the country's socialist post-independence development model. In recent years the Algerian Government has halted the privatization of state-owned industries and imposed restrictions on imports and foreign involvement in its economy, pursuing an explicit import substitution policy.

Hydrocarbons have long been the backbone of the economy, accounting for roughly 30% of GDP, 60% of budget revenues, and nearly 95% of export earnings. Algeria has the 10th-largest reserves of natural gas in the world - including the 3rd-largest reserves of shale gas - and is the 6th-largest gas exporter. It ranks 16th in proven oil reserves. Hydrocarbon exports enabled Algeria to maintain macroeconomic stability, amass large foreign currency reserves, and maintain low external debt while global oil prices were high. With lower oil prices since 2014, Algeria's foreign exchange reserves have declined by more than half and its oil stabilization fund has decreased from about $20 billion at the end of 2013 to about $7 billion in 2017, which is the statutory minimum.

Declining oil prices have also reduced the government's ability to use state-driven growth to distribute rents and fund generous public subsidies, and the government has been under pressure to reduce spending. Over the past three years, the government has enacted incremental increases in some taxes, resulting in modest increases in prices for gasoline, cigarettes, alcohol, and certain imported goods, but it has refrained from reducing subsidies, particularly for education, healthcare, and housing programs.

Algiers has increased protectionist measures since 2015 to limit its import bill and encourage domestic production of non-oil and gas industries. Since 2015, the government has imposed additional restrictions on access to foreign exchange for imports, and import quotas for specific products, such as cars. In January 2018 the government imposed an indefinite suspension on the importation of roughly 850 products, subject to periodic review.

President BOUTEFLIKA announced in fall 2017 that Algeria intends to develop its non-conventional energy resources. Algeria has struggled to develop non-hydrocarbon industries because of heavy regulation and an emphasis on state-driven growth. Algeria has not increased non-hydrocarbon exports, and hydrocarbon exports have declined because of field depletion and increased domestic demand.

Among the 25 poorest countries in the world, landlocked Mali depends on gold mining and agricultural exports for revenue. The country's fiscal status fluctuates with gold and agricultural commodity prices and the harvest; cotton and gold exports make up around 80% of export earnings. Mali remains dependent on foreign aid.

Economic activity is largely confined to the riverine area irrigated by the Niger River; about 65% of Mali's land area is desert or semidesert. About 10% of the population is nomadic and about 80% of the labor force is engaged in farming and fishing. Industrial activity is concentrated on processing farm commodities. The government subsidizes the production of cereals to decrease the country's dependence on imported foodstuffs and to reduce its vulnerability to food price shocks.

Mali is developing its iron ore extraction industry to diversify foreign exchange earnings away from gold, but the pace will depend on global price trends. Although the political coup in 2012 slowed Mali's growth, the economy has since bounced back, with GDP growth above 5% in 2014-17, although physical insecurity, high population growth, corruption, weak infrastructure, and low levels of human capital continue to constrain economic development. Higher rainfall helped to boost cotton output in 2017, and the country's 2017 budget increased spending more than 10%, much of which was devoted to infrastructure and agriculture. Corruption and political turmoil are strong downside risks in 2018 and beyond.