The World Bank has raised its growth forecast for the Algerian economy in 2026 to 3.7 percent, compared to the 3.5 percent expected last January, despite escalating geopolitical tensions in the region, led by the repercussions of the war in Iran.
These estimates were included in a recent report on economic developments in the Middle East and North Africa region, along with Afghanistan and Pakistan, where the Bank pointed to a clear divergence in the performance of the region's economies between energy-exporting and energy-importing countries.
Algeria Among the Beneficiaries
The forecasts showed an improvement in the performance of oil-exporting countries outside the Gulf region, led by Algeria and Libya, where the significant rise in oil and gas prices contributed to supporting revenues and strengthening growth prospects.
Brent crude prices recorded an increase of about 60 percent to reach 112 dollars per barrel, while natural gas prices in Europe rose by about 70 percent, providing a strong boost to economies dependent on energy exports.
The World Bank classified Algeria in the category of "developing oil-exporting countries," a category that differs from Gulf countries in terms of institutional capabilities and the size of fiscal space available for spending, making its growth path more linked to global market fluctuations.
On the other hand, energy-importing countries in the region, such as Tunisia, face increasing inflationary pressures as a result of rising energy prices, in addition to fiscal challenges, especially with the continuation of local price subsidy policies.
Sharp Regional Slowdown Due to Conflict
According to the report, regional economic growth is expected to witness a noticeable decline, as the real GDP growth rate for the Middle East and North Africa region is expected to fall from 4 percent in 2025 to only about 1.8 percent in 2026.
This slowdown is mainly linked to the impact of the war in Iran on the economies of the Gulf Cooperation Council countries and Iraq, which led to disruptions in energy markets and supply chains, negatively affecting economic activity in these countries.
The World Bank also revised its previous forecasts, which in January 2026 indicated regional growth of 4.2 percent, before sharply lowering them in light of recent geopolitical developments, while excluding Iran from the calculations due to the lack of accurate data on the impact of the war on its economy so far.
Rising Industrial Policies
The report highlighted an increasing trend towards adopting industrial policies in the region, as the number of official initiatives in this field has tripled over the past decade.
Development plans in North African countries focused on strategic sectors, most notably:
- Tourism (within 16 development plans)
- Agriculture (14 plans)
- Automotive industry
Developing countries in the region also tend to use tools such as tariffs and import policies, rather than relying on direct subsidies that characterize Gulf economies.
Persistent Structural Challenges
Despite the relative improvement in some economies, the region still faces deep structural challenges, including weak productivity growth, the limited role of the private sector, and heavy reliance on hydrocarbon exports.
19 national development plans also showed that common priorities are creating job opportunities, developing human capital, and combating unemployment.
The report warned of the long-term effects of conflicts, noting that conflicts in the region could lead to a decline in per capita income by about 45 percent over seven years, which is equivalent to losing nearly 35 years of economic development progress.
